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In re Urethane Antitrust Litigation

United States District Court, Tenth Circuit

July 25, 2013

IN RE URETHANE ANTITRUST LITIGATION (MDL No. 1616)
v.
BASF SE, et al., This Relates to the following Polyether Polyol Cases: Carpenter Co., et al. and Woodbridge Foam Corp., et al.
v.
BASF SE, et al., and Dash Multi-Corp, Inc., et al.
v.
BASF SE, et al.

ORDER

James P. O’Hara, U.S. Magistrate Judge

The plaintiffs in this multidistrict litigation (“MDL”) allege that the defendant, The Dow Chemical Company, conspired with other chemical manufacturers to fix prices for certain polyurethane chemical products in violation of the Sherman Act, 15 U.S.C. § 1.[1] The litigation includes both a class action and the three direct actions captioned above, which were brought by plaintiffs who opted out of the class action. The class action was tried to a jury earlier this year, with judgment awarded in favor of the class-action plaintiffs.[2] The direct actions were essentially stayed during the class-action trial and events immediately preceding trial.[3] Now that the class action has concluded, the direct actions are again active before the court. The presiding U.S. District Judge, John W. Lungstrum, and the undersigned U.S. Magistrate Judge, James P. O’Hara, conducted a hearing in the direct actions on May 21, 2013. At the hearing, the parties agreed that certain issues should be resolved by this court before the cases are remanded to the MDL transferor court, the District of New Jersey.[4]

One of those issues is whether additional discovery should be permitted on two discrete topics: (a) a binder created for attorneys in preparation for deposing former Dow employee Stephanie Barbour, and (b) Dow’s 2004 investigation into allegations made by Barbour about possible retaliation and code-of-conduct violations by Dow employees.[5] In accordance with guidelines set by the court at the hearing, [6] Dow has filed a motion to modify Scheduling Order No. 8—which set the merits discovery deadline as December 20, 2010[7]—to permit discovery on these topics (doc. 2894). The direct-action plaintiffs (“DAPs”) oppose the motion, arguing that Dow has not demonstrated why it could not have sought the discovery prior to the scheduling-order deadline, nor why the court should permit Dow to retract its previous assertions of privilege over such discovery.[8] Because the undersigned finds the requested discovery relevant to theories newly asserted (i.e., post-discovery-deadline and post-privilege-assertion) by DAPs, the motion is granted and limited discovery is permitted.

I. Background

Barbour was an executive for Dow from 1998 until her termination in February 2004. In her position as a global business director, she had responsibility for a large portion of Dow’s polyurethane business. She reported to David Fischer, a Dow vice president, and worked with Marco Levi, another global business director who reported to Fischer.

Barbour was deposed in this litigation in September 2010. She testified that, beginning in 2000, she became aware that Levi was having discussions with a Dow competitor regarding future pricing in the urethane industry.[9] She stated that she reported these discussions to Lynn Schefsky, Dow’s in-house counsel.[10] Barbour further testified that in 2004, shortly after she learned that Dow was terminating her employment, she informed Phil Cook, a Dow executive vice president, that she believed her termination was the result of retaliation by Fischer for her “fairly public” reports to Schefsky about things that violated Dow’s code of conduct, including Levi’s conversations with competitors about future pricing.[11] Cook directed Tom McCormick, Dow’s compliance and ethics officer, and an attorney, to lead an internal investigation into Barbour’s allegations.[12] Finally, Barbour testified that she had prepared notes memorializing debriefing sessions in which Levi reported his pricing conversations to Fischer.[13] She stated that she told McCormick about the notes, but that the notes were not included in the deposition binder prepared by Dow’s counsel.[14] Barbour speculated that the notes may have been destroyed when she left Dow.

During Barbour’s deposition and thereafter, Dow asserted attorney-client privilege and work-product protection over the contents of the deposition binder and all documents related to McCormick’s 2004 internal investigation.[15] This led the class-action plaintiffs and DAPs to file a joint motion to compel discovery concerning Barbour’s reports, notes, and the subsequent investigation.[16] Plaintiffs argued that Dow waived the privileges under Fed.R.Evid. 502(a) by allowing Barbour, during her deposition, to partially disclose legal advice given by Dow attorneys.[17] On January 31, 2011, the undersigned issued an order largely sustaining Dow’s privilege.[18] The undersigned found, “nothing indicates that Dow is attempting to gain a tactical advantage by putting at issue the broader subject of the investigation.”[19] Specifically, the undersigned noted that Dow had represented in its response brief that it “does not seek to use the McCormick investigation in any fashion in this litigation.”[20] Thus, the undersigned denied plaintiffs’ motion to compel discovery about the investigation.

Less than a week before the class-action trial was scheduled to begin, Dow changed course and voluntarily produced its documents arising from the 2004 investigation. Class action plaintiffs filed an emergency motion to preclude Dow from using the documents and from referencing the 2004 internal investigation at trial.[21] Judge Lungstrum considered the motion the day before trial and ruled that the parties could not introduce or refer to the documents or the 2004 investigation until the court directed otherwise.[22] Judge Lungstrum reasoned that if Dow was going to waive the privilege, it should have done so earlier “because it may have opened the door to additional discovery” by plaintiffs.[23]

II. Legal Standards

Motions to modify a scheduling order are governed by Fed.R.Civ.P. 16(b)(4), which provides that “[a] schedule may be modified only for good cause and with the judge’s consent.” The party seeking to extend a scheduling-order deadline must establish good cause by proving the deadline could not have been met with diligence.[24] This normally requires the moving party to show good faith on its part and some reasonable basis for not meeting the deadline.[25] Neither the bad faith of the moving party, nor the lack of prejudice to the non-moving party is a focus of the inquiry.[26] Whether to modify the scheduling order lies within the court’s sound discretion.[27]

As noted by DAPs, the undersigned stated in Scheduling Order No. 8—the last scheduling order entered in this action—that the deadlines set therein were “firm” for the reasons discussed at a June 6, 2011 status conference, i.e., Judge Lungstrum’s desire to move this case to resolution and avoid moving the class-action trial setting.[28] The undersigned warned the parties that deadlines set in the order would not be modified “unless there are truly extraordinary circumstances, ” rather than mere “good cause.”[29] Given the present posture of the case—which is very different from what it was when Scheduling Order No. 8 was entered two years ago (e.g., there is no imminently pending trial)—the undersigned finds it appropriate to consider Dow’s request for additional discovery under the usual good-cause standard.[30]

III. Discussion

A. Good Cause Exists to Extend the Discovery Deadline

The resolution of this dispute largely turns on the unexpected direction that this litigation has taken since the end of both the scheduling-order discovery period and Dow’s assertion of privilege over the 2004-internal-investigation records. Specifically, DAPs have indicated an intent to pursue two theories that were not active in the case during the discovery period. First, DAPs have “reserved the right” to pursue a theory that Dow improperly destroyed Barbour’s notes after the conspiracy ended in an effort to cover it up. Second, DAPs have indicated that they may argue at trial that Barbour made antitrust allegations and complaints in 2004, but that Dow did not investigate them. Because these allegations were not recognized theories in this case during the discovery period, including ...


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