Opinion
No. 01-2373-M1V.
July 3, 2003.
ORDER ON PRODUCTION OF DOCUMENTS AFTER IN CAMERA REVIEW
Before the court are documents produced to the court by Medtronic Sofamor Danek, Inc. ("Medtronic") for in camera inspection pursuant to this court's orders dated April 10, 2003, and June 6, 2003. After reviewing the documents in camera, the court grants Michelson's motion to compel production of the unredacted versions of these documents.
By order dated April 10, 2003, the court ordered Medtronic to produce certain documents designated as Items 5 and 6 on Medtronic's initial privilege log. These items consisted of documents compiled by Sofamor Danek's attorneys, listing the intellectual property holdings of Sofamor Danek. These documents were provided to Medtronic in 1998 during the merger of Sofamor Danek and Medtronic and attached to the merger agreement as schedules (hereinafter referred to as "merger lists"). Medtronic had opposed production of the merger lists on the basis of attorney-client privilege and work product doctrine. The April 10, 2003 order which required Medtronic to produce the merger lists authorized Medtronic to "redact any attorney advice and opinion, instructions from Danek to its attorneys and vice versa, legal theories, and mental impressions." Order Granting in Part Defendant Michelson's Motion to Compel the Production of Merger Lists, Michelson v. Medtronic Sofamor Danek, Inc., Civil Case No. 01-2373 (W.D. Tenn. Apr. 10, 2003), at 13.
On April 24, 2003, Medtronic produced copies of the merger lists to Michelson but the produced versions were heavily redacted. The primary redaction on the schedules was the column entitled "current status." On all one hundred pages, the current status of each item of intellectual property was redacted. In addition, in some instances, Medtronic redacted headings in the schedule. Finally, on Schedule 3.13B, Medtronic redacted part or all of the titles. Medtronic offered no additional explanation for the redactions other than its previously claimed privileges.
After review in camera of the redactions, the court finds that none of the redacted information is protected by the attorney client privilege or work product doctrine. Therefore, Medtronic is directed to produce to Michelson for inspection, within ten days of the date of this order, unredacted versions of these documents.
IT IS SO ORDERED this 3rd day July, 2003.
ORDER ON MOTION FOR CLARIFICATION AS TO DEFENDANTS' PRODUCTION OF TAX RECORDS OR RETURNS
Before the court is the motion of the plaintiff, Medtronic Sofamor Danek, Inc., filed June 11, 2003, seeking a clarification of prior discovery orders concerning the obligations of the defendants, Gary Karlin Michelson and Karlin Technology, Inc. ("KTI") to produce tax returns and/or accompanying receipts, statements, invoices, and other tax-related information. The motion was referred to the United States Magistrate Judge for determination.
The underlying case is a contract dispute over intellectual property in the field of spinal fusion technology. On or about October 11, 2001, Medtronic propounded upon defendants Michelson and KTI a document request seeking, as Request No. 144, "[a]ll federal and state income tax records for Michelson and/or KTI for any calendar or fiscal year ending in 1990 to date." The defendants resisted production, and October 24, 2002, this court entered an order compelling, inter alia, a response to Request No. 144. Order Granting in Part and Denying in Part Pl.'s Renewed Mot. to Compel, Medtronic Soffamor Danek, Inc. v. Michelson, Civil Case No. 01-2373 (W.D. Tenn. Oct. 25, 2002) [hereinafter the "October Order"]. As a basis for its decision, this court specifically considered whether tax returns and financial statements were privileged; the defendants' contentions that tax returns did not provide valuations of the technologies at issue; the defendants' contentions that tax returns did not reflect the defendants' net worth; the defendants' assertions that they maintain no financial statements other than tax returns; and the plaintiff's contention that financial information was relevant to the defendants' claims of lost profits. October Order at 4-17. The court determined that the only basis "for compelling production of tax returns," (id. at 15), was its potential relevance to claims for lost profits and found that "the income tax returns of Michelson and KTI are relevant to their claim for lost profits," (Id. at 17). The court then granted "Medtronic's motion as to Request No. 144, seeking KTI and Michelson's income tax returns." (Id. at 24.) (emphasis added)
The factual and procedural background of this lawsuit has been well-documented in previous discovery orders, see, e.g., Medtronic Soffamor Danek, Inc. v. Michelson, No. 01-CV-2373-GV (W.D. Tenn. Jan. 30, 2002) (order on cross-motions for protective order and on motions to compel); Medtronic v. Michelson (July 18, 2002) (order on defendants' motion to compel and sanctions); Medtronic v. Michelson (Aug. 6, 2002) (order on defendants' motion to approve Bruce Ross under the protective order), and reference is made to them for a detailed factual analysis.
The defendants sought reconsideration of the October order on grounds that they intended to drop their claims for lost profits. After a careful review, District Court Judge Jon P. McCalla concluded that it was not clear that the defendants had dropped their lost profit claims. Accordingly, he directed them "to produce their tax records, including Defendants' tax returns, in response to . . . request No. 144." Order Denying Defs.' Mot. for Recon. of Ord. on Medtronic Sofamor Danek's Renewed Mot. to Compel and Granting Defs.' Request to Appoint a Special Master to Review Defs.' Tax Returns In Camera, Medtronic Sofamor Danek, Inc. v. Michelson, Civil Case No. 01-2373 (W.D. Tenn. Apr. 30, 2003). In the same order, Judge McCalla also agreed to appoint a special master to review in camera the documents produced.
Medtronic now moves to clarify whether these two orders, read in combination, require production of tax returns, or of tax records, which Medtronic defines in its supporting memorandum as "those documents that are used in the preparation of tax returns such as various forms, schedules, receipts, invoices, canceled checks, account statements, etc. and all backup and supporting material to tax returns which are not filed with the returns. (Pl. Medtronic Sofamor Danek, Inc.'s Mem. in Supp. of Its Mot. for Clarification that the Court's Prior Orders Require Defs. to Produce Their Tax Records at 2.)
It is true that Medtronic's Request No. 144 sought "tax records" by its exact wording. The term "records, " however, was not defined in that request, and the court, when ruling on Medtronic's motion to compel, did not interpret Request No. 144 to include the receipts, invoices, canceled checks, account statements, or backup material to which Medtronic now claims entitlement. Medtronic originally made separate and discrete requests for different types of tax-related information. The motion to compel that was the subject of the October order separately sought "financial statements" in Request No. 143, "documents referring or relating to any tax reasons why Defendants did not want . . . to license or assign [technologies]" in Request No. 174, and "documents referring or relating to tax considerations [related to the agreements at issue]" in Request No. 175. The court denied the motion to compel as to each of these requests. If the term "tax records" in Request No. 144 is construed as broadly as Medtronic now insists it should be, Request No. 144 would then include the information sought by the three other disputed document requests, which the court specifically declined to compel the defendants to produce.
As the court has previously noted, unnecessary disclosure of financial information should be avoided. The court also notes that Judge McCalla has appointed a special master to conduct an in camera review at the defendants' expense. Judicial economy would be ill-served by requiring review of every canceled check, receipt, invoice, and account statement that underlies the defendants' tax returns unless the special master determines that Medtronic has a specific need for such information.
For the foregoing reasons, the defendants may, at this time, satisfy their obligation as to Request No. 144 by disclosing only tax returns actually filed, along with any forms, schedules, and attachments thereto that also were actually filed, unless, after review of the tax returns, the special master determines that additional documentation is needed to clarify all or part of the tax returns. This order is limited to a clarification of the scope of Request No. 144 and accordingly does not reach the defendants' renewed contention that they have withdrawn their claims for lost profits.
The Clerk is directed to serve a copy of this order on the special master appointed to review tax returns.
IT IS SO ORDERED this 23rd day of July, 2003.