*1 As the Special Master writes primarily for the benefit of the parties, the court will limit the discussion to the procedural history and underlying facts which bear directly on this motion.

Plaintiffs have filed a motion seeking a protective order as to the depositions of Rule 30(b)(6) corporate representatives. Essentially, Plaintiffs seek to preclude Defendants from questioning witnesses as to specified topics set forth in deposition notices. Those notices are identical as to each of the three named Plaintiffs.[1] Within those notices are certain topics for which Plaintiffs seek a protective order – Topics 2, 3, 4, 5(i), 5(iii) and 7(iv).

Although each of these topics will be addressed in greater detail throughout this Order and Opinion, for brevity's sake, they read, in pertinent part, as follows:

Topic 2. Your corporate organization and ownership, including but not limited to Your relationship with MSP Recovery, LLC, MSP Recovery, Inc., MSP Recovery Associates, and MSP Recovery Law Firm.

Topic 3. Your relationship with any entity that has an interest, financial or otherwise, in this Action, including (i) the identity of the entity, (ii) the terms of the relationship, (iii) when the relationship began, (iv) any agreements between you and that entity, (v) the entity's ownership of any Assignors’ claims...and, (vi) the entity's role in this Action. This includes Your use of funding from third parties to finance this Action including but not limited to...(the “Virage entities”)...(the “RD legal entities”);...and (“Brickell Key”).

Topic 4. Communications with Your investors, the Virage entities, the RD legal entities, and Brickell Key regarding (i) Your business model, purpose and strategies; (ii) Assignment Agreements and any other agreement with any Assignor; (iii) claims recovery on behalf of any Assignor; and (iv) this Action.

Topics 5(i) and 5(iii). The identification of Assignors with claims that have been and/or are at issue in this Action including but not limited to: (i) Your processes and procedures to identify potential Assignors...and (iii) Your valuation of Assignors’ claims.

Topic 7(iv). Your agreement(s) with each Assignor, including but not limited to...(iv) the distribution of any financial recoveries received, or that may be received, by MSP in connection with asserting claims or making recoveries on each Assignor's behalf.

After receipt of the deposition notices, Plaintiffs, in addition to objecting to each of these topics as being overbroad, vague, ambiguous, not relevant and not proportional to the needs of the case, voiced specific objections and stated that they would not produce a corporate representative to testify on that topic but instead would seek a protective order. Plaintiffs have moved for that protective order.

In deciding this motion, the Special Master has reviewed the following:

After considering all of the submissions and based upon the following analysis, it is the opinion of the Special Master that Plaintiffs’ motion for a protective order as to Rule 30(b)(6) depositions is GRANTED in part and DENIED in part.

I. Procedural History and Statement of Facts.

The named Plaintiffs at the inception of this litigation were MSP Recovery Claims, Series, LLC; MAO-MSO Recovery II, LLC, Series PMPI; and MSPA Claims I, LLC (collectively “Plaintiffs” or singularly “MSP”). Plaintiffs assert claims on behalf of certain assignors, that is, on behalf of a series of private health plans which provide prescription drug coverage, including coverage for insulin products, to their respective members.

Defendants are Sanofi-Aventis U.S. LLC; Novo Nordisk Inc.; and Eli Lilly and Company (“Defendants”). Each of the Defendants manufacture insulin products designed to treat patients diagnosed with diabetes.

Plaintiffs seek to recover, as assignees, monetary damages which they assert were the result of actions individually and collectively taken by Defendants. They claim the manufacturers have employed an insulin pricing scheme that has unlawfully raised the purchase price of that medicine. Plaintiffs further contend that the health plans, from which they have received their assignments, suffered financial harm as a consequence of the scheme.

Over the last several years, the Special Master has managed this litigation during which disputes have arisen as to written discovery but also as to the scheduling and conduct of depositions. As noted, this is another instance of a dispute concerning the manner in which depositions should be conducted and the appropriate scope of depositions.

II. Plaintiffs’ Argument.

Plaintiffs assert that this case centers on the rising price of Defendants’ insulin products. The litigation is not about Plaintiffs’ corporate structure and business operations. Nevertheless, they say, Defendants seek to elicit non-discoverable information from their corporate representatives as to those topics.

Citing Fed. R. Civ. P. 26(c)(1), MSP moves for a protective order and concedes it bears the burden of showing that the order is particularly necessary to obviate a significant harm. The Rule provides that “for good cause”, a court may issue an order to protect a party from “annoyance, embarrassment, oppression or undue burden and expense” and the order may include, among other things, “forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters”. Here, say Plaintiffs, good cause exists to do so.

Plaintiffs address each topic separately as follows.

Topic 2. This topic is addressed at MSP's “corporate organization and ownership”. Plaintiffs argue that Defendants are seeking to “pierce the corporate veil” to obtain irrelevant information. Citing Jack LaLanne Fitness Centers, Inc. v. Jimlar, Inc., 884 F. Supp. 162, 165-166 (D.N.J. 1995), Plaintiffs maintain Defendants must show fraud or injustice to pierce the corporate veil but have failed to plead any allegations of such. Additionally, MSP Recovery Claims Series, LLC's corporate disclosure statement asserts that VRM MSP Recovery Partners, LLC is its sole member. Plaintiff MSPA Claims I, LLC's statement asserts that MSP Recovery Series, LLC is its sole member. Therefore, any inquiry seeking information beyond these entities constitutes a fishing expedition.

*3 In response to Defendants’ contention that these questions are relevant as to champerty and maintenance defenses, Plaintiffs say this assertion fails because Defendants did not plead champerty and maintenance as an affirmative defense and the deadline to amend pleadings has expired. Nor has champerty and maintenance been put “at issue” and hence, these defenses are not relevant to any claim or defense under Rule 26(b)(1).

Topic 3. This topic essentially deals with Plaintiffs’ relationship with litigation funders, i.e., “entit[ies] that [have] an interest, financial or otherwise, in this Action” and “ownership of any Assignors’ claims”. MSP asserts that there is no third-party litigation funding present here which requires disclosure under the Federal rules and even if that were the case, Defendants must demonstrate good cause as to why they need this information. Citing a 2019 Memorandum Opinion and Order of Magistrate Judge Schneider, In Re Valsartan N-Nitrosodimethylamine (NDMA) Contamination Prods. Liab. Litig., 405 F. Supp. 3d 612 (D.N.J. 2019) (“Valsartan”), which concerned discovery directed at litigation funding, Plaintiffs say that the Court laid out several hurdles that a party must overcome to obtain litigation funding discovery, although conceding that this discovery is not off limits under all circumstances. Quoting extensively from that Memorandum Order, which, in turn cites multiple decisions on this topic, Plaintiffs assert that the balance of authority holds that discovery of litigation funding is irrelevant, has no bearing on credibility, does not impact on a party's claim or defenses and is otherwise not a proper subject of discovery. Only when good cause exists will discovery be ordered such as “where there is a sufficient showing that a non-party is making ultimate litigation or settlement decisions, the interests of plaintiffs...are not being protected, or conflicts of interest exist”. [Citing Valsartan, at *8.] Here, say Plaintiffs, these issues do not exist and consequently they will not produce a corporate representative to testify on this topic.

Topic 4. This topic addresses communications with MSP's “investors” – the Virage entities, the RD Legal Entities, and Brickell Key. Plaintiffs reiterate that there is no third party litigation funding that would require disclosure of communications with these entities. Defendants have still not demonstrated good cause as to why they need information within this topic. Plaintiffs again cite Valsartan in support of this position and also note that there is a growing body of law holding that litigation funding agreements and related documents are protected by the work product doctrine.

Topics 5(i) and 5(iii). The topics address MSP's “processes and procedures” to identify assignors and to value their claims. Plaintiffs assert these topics are objectionable since they seek Plaintiffs’ pre-suit discovery and investigations made in anticipation of litigation and, therefore, are protected by attorney-client and work product privileges. Even if not privileged, Defendants have failed to show how the topics are relevant to claims or defenses. Additionally, LifeWallet,[2] uses “propriety algorithms and processes” to identify claims data as to “recoverable opportunities”. These algorithms and processes, say Plaintiffs, constitute trade secrets. More importantly, the two named Plaintiffs in the case “are merely holding companies” and not engaged in identifying potential assignors or evaluating claims. As such, they would not be able to produce corporate representatives to testify on these topics.

*4 Topic 7(iv). This topic addresses agreements with each assignor as to the distribution of “financial recoveries”. Here, Plaintiffs re-alleges their objections and arguments as to Topics 2, 3 and 4. They assert the distribution of recoveries is not relevant to any claim or defense and not proportional to the needs of the case.

III. Defendants’ Opposition.

Defendants maintain that MSP asks for a protective order barring permissible Rule 30(b)(6) deposition discovery. Defendants argue that MSP is in the business of acquiring assignors’ claims and it is those claims which are being prosecuted in this lawsuit. Hence, discovery regarding these acquisitions is relevant to the defense. Moreover, MSP admits that the named plaintiffs are mere holding companies for those claims and that non-party investors and others actually own these claims.

Defendants stress that there exist maintenance and champerty issues in this case and, therefore, they are entitled to discovery as to who is driving this lawsuit. In response to Defendants’ efforts to do so, MSP is attempting to preclude testimony on improper grounds including privilege, work product and confidentiality.

Defendants reiterate that they have served identical deposition notices on Plaintiffs seeking corporate testimony on the following topics: (1) corporate organization; (2) plaintiffs’ owners; (3) MSP's services for and contracts with assignors; and (4) the “processes” MSP uses to identify assignors who allegedly overpaid for insulin. While MSP has agreed to produce witnesses, they have objected to and will not produce witnesses as to certain topics (set forth above).

Defendants say MSP has conceded that the legal standard it must meet is a significant one, i.e., MSP has a heavy burden of showing that good cause exists for issuance of the protective order, citing the Special Master's decision In Re: Valeant Pharms. Int'l, Inc. Sec. Litig., 2021 WL 3140030, at *8 (D.N.J. July 7, 2021) and Fed. R. Civ. P. 26 (c)(1). Defendants go on to argue that Plaintiffs have failed to establish good cause as to any topic.

Briefly stated, what follows is Defendants’ positions as to each disputed topic:

Topic 2. MSP concedes Defendants are entitled to testimony on the organization and ownership of the entities which have been identified as the holding companies’ sole members. However, if discovery is limited to the holding companies’ sole members, Defendants are precluded from doing more than “to scratch the surface” of a complex corporate organization. Indeed, because Plaintiffs are holding companies, Defendants need to explore the corporate structure. In support, Defendants provide both a narrative and graphic illustration as to “what is known about named Plaintiff MSP Recovery Claims, Series LLC”. [See, Defendants’ opposition to motion, pp. 2-3.][3] In effect, Defendants say, what little is known about the corporate structure demonstrates a relationship between Plaintiff MSP Recovery Claims, Series LLC and five other entities including Virage, a litigation funder. Other than MSP's disclosures of these corporate names, Defendants say they know nothing about these entities’ roles in overseeing and making litigation decisions for the named Plaintiff holding companies. Defendants go on to say that courts routinely recognize the need to inquire into corporate structure and allow discovery into corporate ownership and organization through Rule 30(b)(6) depositions. [Citations omitted.] The same should apply here. That is, testimony as to MSP's corporate structure “will help defendants assess who is making litigation decisions and ascertain the real parties in interest”.

*5 In addition, Defendants say this discovery is also relevant to their position that Plaintiffs lack standing under the doctrines of maintenance and champerty. The depositions will shed light on whether MSP engaged in “officious intermeddling” by instigating litigation and also on MSP's motive in pursuing this litigation. Discovery has shown that MSP and the assignors had no relationship before executing the assignments and many of the assignors were ignorant of the then existing lawsuit when the claims were sold. Additionally, MSP used investors like Virage to fund the purchase of assignors’ claims and prosecute the litigation which bears directly on the maintenance and champerty defenses.

Discovery has also demonstrated that a number of non-parties are directly involved in MSP's business of instituting lawsuits such that Defendants are entitled to explore these entities’ connections with Plaintiffs.

In response to MSP's argument for limiting corporate discovery, Defendants take the following position. First, Defendants are not attempting to “pierce the corporate veil” or recover against Plaintiffs’ shareholders but simply seek to understand the relationship between the entities connected to the parties bringing suit. Second, MSP does not dispute that this topic is relevant to champerty and maintenance but asserts that Defendants have failed to plead those defenses. As to this, Defendants say that in this Circuit, affirmative defenses can be raised by motion at any time Plaintiffs had notice of the defense, citing Cetel v. Kirwain Fin. Grp., Inc., 460 F. 3d. 494, 506 (3rd Cir. 2006) and Kleinknecht v. Gettysburg Coll., 989 F 2d. 1360, 1373-74 (3rd Cir. 1993). Plaintiffs cannot contend that they were without notice of their champerty and maintenance defenses which Judge Martinotti discussed in the Court's order at the time Defendants filed a motion to dismiss. [See, ECF 89.] Moreover, while Defendants’ answers did not specifically use the words “champerty” or “maintenance”, they raised affirmative defenses which included lack of standing, lack of capacity to bring the claims, and invalid assignments – defenses which encompass the doctrines. Hence, Defendants have been raising standing arguments predicated on champerty and maintenance throughout the litigation.

Topics 3 and 4. These topics address MSP's relationship with entities that have an interest in the action [Topic 3] and communications with investors, specifically the Virage entities, the RD Legal entities and Brickell Key [Topic 4]. While MSP says that these topics concern only third party litigation funding, Defendants say this is not the case and the topics “more broadly seek to understand the named plaintiffs’ relationship and communications with ‘investors’ that have interests in this action...” Virage, for example, appears to actively participate in MSP's decision making, something which is reflected in email communications between MSP and Virage as well as with RD Legal. Accordingly, discovery of MSP's relationship with its “owners, managers and investors” is relevant to assessing the non-parties’ involvement and supporting the champerty and maintenance defenses. And while MSP claims it accepts no third party funding, at the same time it contends that funding agreements and communications are protected.

Topic 5(i) and 5(iii). This topic seeks testimony as to how MSP identified assignors with claims at issue in this action. In response, MSP contends that these topics seek information as to “pre-suit discovery and investigations” protected by attorney-client privilege and the work product doctrine. Defendants counter that the topics merely inquire into MSP's processes and inquiries as to its own potential assignors. Even if the topics did concern pre-suit discovery and investigations, MSP is still obligated to produce a witness. “Rule 30(b)(6) deposition topics seeking information about an organization's pre-complaint investigation or the factual basis for its allegations – even if those facts are ‘learned from discussions with counsel’ – are not prohibited by the attorney-client privilege or the work product doctrine”, citing State Farm Mut. Auto Ins. Co. v. New Horizon, Inc., 250 F.R.D. 203, 206, 215-16 (E.D.Pa. 2008) and other cases. While MSP can raise privilege objections at the deposition, a blanket objection fails.

*6 Secondly, as to MSP's relevance argument, both subtopics are relevant to how MSP marketed itself to assignors, what representations were made, due diligence in identifying assignors with claims and its determination of the purchase price for those claims. Evidence about services that MSP would provide goes to Defendants’ argument that the agreements are invalid due to champerty and maintenance. As to the valuation of the assignors’ claims, it is relevant to damages “including how MSP determined that the assignors’ claims have financial merit and how it valued those claims”.

Topic 7(iv). This topic seeks to explore agreements with each assignor as to the distribution of any financial recoveries. To this, say Defendants, MSP offers no argument other than alluding to Rule 26(b)(1) but the information sought about the distribution of recoveries to non-parties falls well within the scope of discovery and is relevant to determine the degree of these entities’ involvement in the litigation decision.

IV. Defendants’ Request for Leave to File New Evidence and Plaintiffs’ Opposition

After submission of the briefing described above, Defendants forwarded a letter to the Special Master seeking leave to submit new evidence concerning MSP's motion for a protective order. Briefly stated, what follows is Defendants’ position and Plaintiffs’ opposition to that application.

Defendants say Plaintiffs have now made two public security disclosures and financial reports which undermine their application for the protective order. In a Form 10-K, filed July 27, 2023, MSP Recovery, Inc. acknowledged that the doctrines of maintenance and champerty operate as prohibitions in pursuing third party claims and, consequently, contrary to the position taken here, Plaintiffs admit that maintenance and champerty are viable defenses. Further, in a Form 8-K, filed April 14, 2023, the company admitted to material errors in its financial statement and announced that the FDC had initiated an investigation in August 2022. Furthermore, MSP received a subpoena from the U.S. Attorney's office in conjunction with a Grand Jury investigation and an assignor (not an assignor here) Cano Health, has filed a lawsuit alleging that MSP was a sham which improperly relied on the value of claims it acquired thereby over-inflating the valuation of its securities.

These disclosures, say Defendants, reinforce their need to pursue testimony as to MSP's corporate relationships and evaluation of assignor claims.

In response, Plaintiffs argue that Defendants submitted their letter simply to disparage MSP and this new evidence has no bearing on the issues at the heart of this motion.

MSP reiterates that this matter is a simple case, i.e., Defendants have artificially raised the price of insulin. The damages which resulted simply consist of the difference between what Plaintiffs’ assignors paid for the insulin products and what they should have paid but for Defendants’ scheme.

MSP asserts that it is a recognized technology leader in the secondary payor reimbursement recovery industry and that its actions in recovering claims have been supported by the U.S. Department of Health and Human Services (“HHS”).

As to Defendants’ charge that MSP's financial reports acknowledge the validity of maintenance and champerty defenses, Plaintiffs say that these are specific affirmative defenses which Defendants have never raised in their pleadings and are now barred from doing so since the deadline for amending pleadings expired on April 20, 2021. Furthermore, the reported investigations are just that – investigations which fail to bear on the matters at issue here. As to the Cano Health lawsuit, Plaintiffs say that these are slanderous allegations derived from an unverified complaint in response to which MSP Recovery has filed a motion to strike.

*7 Finally, as to Defendants’ assertion that this new evidence further supports a need for discovery regarding the valuation of the assigned claims, Defendants have failed to articulate why this is significant and MSP points out that it has produced claims data, including unaltered raw claims data, while Defendants have taken extensive depositions on this topic and continue to do so.

V. Legal Standard.

The parties do not fundamentally disagree that Fed. R. Civ. P. 26(c)(1) governs the decision in this motion but disagree as to whether Plaintiffs are entitled to the relief they seek – a protective order.

First, Fed. R. Civ. P. 26(b)(1) generally addresses the scope of discovery and its limits. The rule provides, in pertinent part:

As Plaintiffs concede, since they are the parties seeking the order, they bear the burden of showing that the order is particularly necessary to obviate a significant harm, Pansy v. Borough of Stroudsburg, 23 F. 3d. 772, 786-87 (3rd Cir. 1994). Furthermore, a party seeking a protective order must show good cause by demonstrating the particular need for protection. Broad, unsubstantiated specific allegations of harm do not satisfy the rule's test. Cipollone v. Liggett Grp., Inc., 758 F. 2d. 1108, 1121 (3rd Cir. 1986).

*8 In this Circuit, certain factors may be considered in determining whether good cause exists. Those factors include: violation of privacy interests, whether the purpose in seeking the information is legitimate or improper, the potential for causing a party embarrassment by disclosure, the importance to public health and safety, the promotion of fairness and efficiency, the status of a party seeking confidentiality and whether the case itself involves issues of public importance. Glenmede Trust Co. v. Thompson, 56 F. 3d. 476, 483 (3rd Cir. 1995) (citing Pansy, supra, at 787-91).

VI. Analysis and Findings.

This motion presents a conundrum in that neither side has focused on a central theme which encapsulates the issues. Nevertheless, the Special Master believes that the issues come down to this.

Unlike most lawsuits, Plaintiffs here are not the parties who were directly harmed by the alleged actions of the Defendants (the insulin pricing scheme) but are instead owners or transferees of the real parties’ in interest claims. That is, at various points in time, Plaintiffs purchased or were transferred the rights to the assignors’ claims and thereafter filed suit in order to be compensated by way of any damages collected. Had MSP been the real party in interest, there is little doubt that Defendants would have the right to at least explore MSP's essential corporate structure through the testimony of its Rule 30(b)(6) witnesses and indeed it appears Defendants explored the assignors’ corporate structure when their Rule 30(b)(6) witnesses have been deposed. Here, however, there exists another layer from which Defendants are attempting to obtain discovery, i.e., from the owners of the assignors’ claims.

This situation is further complicated by the fact that MSP acknowledges that its named Plaintiffs are actually holding companies consisting of yet other entities which, in turn, have ownership interest in the assignors’ claims. This makes for the existence of a complicated, multi-layered corporate structure which Defendants seek to explore.

Plaintiffs are resisting this exploration, in part, by asserting that Defendants’ inquiries are not relevant to the central issue in this lawsuit – whether the insulin manufacturers unlawfully set the price of their products at a level causing financial harm to the assignors who have, in turn, sold their claims to MSP. Therefore, while Plaintiffs concede that to some extent Defendants have the right to inquire into the structure of the corporate entities which own the assignors’ claims, that inquiry can only go so far.

Additionally, much of what is at issue here implicates “litigation funding” on the one hand and Defendants’ position that their defenses, although not expressly pled, include “champerty and maintenance” on the other. Certainly topics 3, 4 and even 2 concern this. While MSP has filed a certification denying that it has received litigation funding from any entity which requires disclosure under the Federal rules, one known funder (Virage) as Defendants note, has been shown to be a participant in multiple email communications which are in fact reflected in Plaintiffs’ privilege log. At the very least, this suggests that Virage (and perhaps other similarly situated entities) despite not technically being parties to this suit, are significantly involved in this litigation, a fact which Defendants say they have the right to explore.

Topics 5(i), 5(iii) and 7 (iv) generally address how Plaintiffs identify assignors, assess the value of assignors’ claims and ultimately distribute any financial recovery. MSP asserts that these inquiries address pre-suit investigations which are privileged and protected while Defendants say they seek only information as to how the assignors in this suit have identified and valued claims and they do not seek discovery as to MSP's overall process for identifying potential claimants. In short, Defendants say they merely seek information as to how MSP identified its assignors and came to the conclusion that the claims were worth pursuing monetarily.

*9 In this Order and Opinion, the Special Master will shortly address each of the topics contained in the deposition notices as to which Plaintiffs object and for which they seek a protective order. Before doing so, however, the following should be noted.

First, and as set forth on pages 11-13 of this Order and Opinion, in conjunction with opposing this motion, Defendants have requested leave to file new evidence which Plaintiffs thereafter opposed. While the Special Master reviewed this application and MSP's opposition to it, the Court did not rely on and did not consider Defendants’ request of the Special Master to take into account this information when deciding the motion. Moreover, Defendants have failed to clearly articulate why MSP Recovery's Form 10-K or 8-K, acknowledging the general existence of potential maintenance and champerty claims and errors in financial statements, bears on the issues specific to this motion, i.e., whether those defenses exist and are applicable here is for a court to decide. Nor is it appropriate for the court to take into account an unresolved investigation of MSP or allegations asserted in a civil lawsuit (the Cano Health case). Accordingly, the findings and rulings set forth throughout this Order and Opinion are based strictly and solely on the parties’ initial submissions (Plaintiffs’ motion and Defendants’ opposition) and nothing more. Accordingly, Defendants’ request for leave to file new evidence is DENIED.

Another issue which has bearing on the motion before this Court concerns Defendants’ assertion that Plaintiffs lack standing and/or are prohibited from maintaining suit against MSP since the claims fail as a consequence of the doctrines of champerty and maintenance.[4] Defendants concede that they did not employ the terms “champerty” or “maintenance” in their answering pleadings, but instead, raised affirmative defenses which included lack of standing, lack of capacity to bring the claims and invalid assignments which, they say, are defenses which encompass the doctrines. Moreover, they have been raising standing arguments predicated on the champerty and maintenance throughout the course of this litigation.

In Judge Martinotti's Opinion of March 29, 2019, the Court addressed Defendants’ assertions of champerty and maintenance defenses. This decision arose out of Defendants’ collective motions to dismiss Plaintiffs’ amended complaint due to lack of Article III standing and failure to state a claim with respect to each cause of action asserted. In reaching its decision, the Court addressed Defendants’ argument that Plaintiffs’ assignments are void under various state laws and specifically those of New York, Delaware, Florida and Ohio. [See, Opinion, p. 16.] The Court ultimately went on to grant in part and deny in part Defendants’ motions as to certain causes of action. While the Court stated that Defendants had not demonstrated that the assignments were champertous, the court also stated that the issue of champertous intent could not be adjudicated at the motion to dismiss stage, and “[a] denial of Plaintiffs’ claims pursuant to the doctrine of champerty at this point in the litigation would be premature”. [See, Opinion, pp. 16-18, emphasis added.] Accordingly, as the Special Master reads the Court's Opinion, Defendants’ defense that MSP has engaged in champerty and maintenance remains viable in this litigation and Plaintiffs have been on notice of Defendants’ positions since the inception of the suit. Indeed, a fair reading of Defendants’ answering pleadings shows they did raise affirmative defenses as to standing, Plaintiffs’ capacity to bring suit and the validity of the assignments from the real parties in interest – defenses akin to champerty and maintenance. [See, ECF 116, ECF 117, ECF 118.] Moreover, since the Special Master has handled discovery disputes in this matter which extend back several years, it is plainly evident that Defendants have pursued discovery in which a central theme has been the validity of MSP's assignments. Hence, champerty and maintenance have been put in issue and Plaintiffs have been on notice of these defenses.

*10 With this said, the Special Master will now turn to the topics contained in the deposition notice which are at issue in this motion, although not in the order presented.

Topics 3 and 4. Noted previously, and as Plaintiffs argue, it is the view of the Special Master that Topics 3 and 4 to a significant extent implicate discovery as to what is commonly called “litigation funding”.

Although Plaintiffs argue that courts are generally loathe to permit the discovery of litigation funding, unfortunately the relatively limited number of decisions which address this issue provide no bright line demarcation as to when discovery related litigation funding should be denied or compelled.

Plaintiffs, as indicated previously, rely heavily on Valsartan, a memorandum Order and Opinion by Magistrate Judge Schneider which the Special Master finds instructive, but not fully dispositive on this issue. Given Plaintiffs’ heavy reliance on this decision, the Special Master will address it in some depth.

Valsartan, a multi-district litigation (MDL) which included a proposed class action, arose out of recalls of contaminated prescription medication. The defendants proposed that a fact sheet be answered by the plaintiffs which included information as to agreements and communications with third-party funders. Id. at 612. Plaintiffs objected, arguing that private financial information was not relevant to the claims and defenses and defendants were without legitimate need for that information. Nevertheless, Plaintiffs agreed to submit documents for in camera review to determine whether “the litigation funding company has control or input into litigation decisions...which could interfere with a plaintiff's control of [the] lawsuit or the attorney-client relationship”. Id. at 614. Defendants countered the information was critical to identifying the real party in interest and to determine plaintiffs’ credibility, the scope of proportional discovery, potential sanctions and medical necessity of plaintiffs’ treatment. Id.

In deciding this mass tort case, the Court noted “[a]t bottom, courts are split on this issue...[but] [w]hat is not in dispute is that there is no binding Third Circuit precedent on whether a plaintiff's litigation funding is a proper subject of discovery. Nor is the court aware of any published New Jersey District Court authority on point”. Id. The Court went on to conclude that under the circumstances of that matter, litigation funding was irrelevant to the claims and defenses and therefore not discoverable. The Court stated that there was a plethora of authority holding that discovery directed at litigation funding is irrelevant, citing decisions from other districts. Nevertheless, the Court made clear that it was not ruling litigation funding is off limits in all instances. Instead, it could be discoverable “where there is a showing that something untoward occurred”. Id. at 615. The court then stated:

In response to this RFP, after asserting that Topic 2 is “overbroad, vague, ambiguous, not relevant nor proportional”, Plaintiffs say they have agreed to produce a witness “to testify as to its amended corporate Disclosure Statements”. While continuing to object on these grounds to this topic, in their letter motion, Plaintiffs later modified their position. Plaintiffs say that while attempting to resolve this dispute, they agreed to produce “a witness to testify about the corporate organization and ownership of the named Plaintiffs, the relationships various non-entities may have [with them]...and Plaintiffs will not limit defendants’ questions to the Amended Corporate Disclosure Statement”. [See, Plaintiff's letter motion, p. 4.] However, Plaintiffs maintain that they still seek a protective order “regarding questions about the ownership of parent organizations, including the corporate members of the Plaintiffs’ limited liability company like Virage”. Id.

Plaintiffs, who bear the burden of demonstrating that a protective order is required to prevent a significant harm, contend what is sought here by Defendants is an attempt to “pierce the corporate veil” and thereby discover irrelevant information which is not proportional to the needs of this case. However, in the Special Master's view, this is an inappropriate reliance upon that doctrine or concept of “piercing the corporate veil”. As Defendants correctly assert, “piercing the corporate veil” is a process by which courts disregard the corporate entity so as to impose liability on corporate shareholders. See Pearson v. Component Tech Corp., 247 F. 3d 471, 484 (3rd Cir. 2001). In other words, it is employed under certain circumstances to permit a party to attack the personal assets of the owners of a corporation or other legal entity (typically shareholders) otherwise protected by the limited liability that a corporation or business entity provides. That concept has no applicability here where Plaintiffs are seeking to discover the structure of the corporate entity of the party prosecuting this litigation.

Additionally, in response to Defendants’ position that discovery of the corporate structure goes to their champerty and maintenance defenses, Plaintiffs counter, as previously noted, that those defenses are not at issue in this lawsuit since Defendants failed to affirmatively plead them. However, as the Special Master set forth previously in this Order and Opinion, these defenses remain extant in this litigation and what Defendants seek by exploring the corporate structure may bear on those defenses. The Special Master finds that Defendants are entitled to explore the ownership and corporate structure of Plaintiffs. Therefore, that aspect of Plaintiffs’ motion seeking a protective order as to Topic 2 is DENIED.

*14 Topics 5(i) and 5(iii). These two topics or subtopics essentially seek to inquire as to how Plaintiffs identify assignors and value their claims. Defendants assert that both subtopics are relevant to how MSP marketed itself to the assignors, its representations made to them, its due diligence processes to identify assignors with claims, and its determination of the purchase prices for those claims.

What Defendants fail to adequately explain is how that information is relevant to Plaintiffs’ claims or more importantly, Defendants’ defenses in this lawsuit. Defendants attempt to assert that as to Topic 5(i) evidence about the services that MSP said it would provide “is relevant to Defendants’ arguments that the assignment agreements are invalid due to maintenance and champerty, and that the assignments do not encompass the complaints’ claims”. As to Topic 5(iii), Defendants say this is relevant to damages “including how MSP determined that the assignors’ claims have financial merit and how it valued those claims”.

Plaintiffs characterize the information Defendants seek as a pursuit of pre-suit discovery and investigations protected by the attorney-client and work product privileges. However, in the Special Master's view, the real issue is, in fact, (as Plaintiffs also argue) whether these topics are relevant to the specific claims or defenses at issue in this lawsuit. While these topics might (barely) touch upon Defendants’ maintenance and champerty defenses, how MSP generally assesses and values potential assignor claims in all litigation is far too attenuated to be relevant to this litigation. Accordingly, Plaintiffs’ request for a protective order as to these topics is GRANTED.

Topic 7(iv). This topic is generally addressed at MSP's agreements with the remaining assignors whose claims they have brought. Plaintiffs object to only subtopic (iv) “the distribution of any financial recoveries received, or that may be received”. Furthermore, Plaintiffs agreed to present a witness to testify about the distribution of recoveries obtained in this litigation “but seek to prohibit questions regarding any distribution to non-party investors or litigation funders”. Plaintiffs assert that this information is not relevant to any claim or defense in this lawsuit, nor proportional to the needs of the case but fail to provide a more detailed argument as to why this is so.

Defendants respond by asserting that MSP's failure to offer an argument in support in and of itself warrants denial of tis motion on this topic. While this may or may not constitute grounds for denial, Defendants make a more cogent argument by asserting that the distribution of recoveries in this action to non-parties bears on determining the degree of these entities’ involvement in MSP's litigation decisions and as to discovering the real parties in interest.

Unfortunately, neither party has produced a detailed analysis as to whether this single subtopic is an appropriate one in light of the allegations and defenses set forth in this lawsuit. However, the Special Master finds that the distribution of the recoveries does bear on the extent to which non-parties may be playing a role in controlling this litigation and making decisions. The subtopic further relates to and bears on Topic 3 (MSP's relationship with any entities having an interest in this action) which the court has determined is an appropriate topic Defendants can explore. Furthermore, since the burden rests with Plaintiffs to show the necessity for a protective order, having failed to do so, and keeping in mind that in this District, Rule 26 is to be construed liberally in favor of disclosure at the discovery stage, the Special Master DENIES Plaintiffs’ motion for a protective order as to Topic 7(iv).

VII. Conclusion

*15 For the reasons set forth above, the Special Master finds as follows: