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Albany Molecular Research, Inc v. George C. Schloemer

April 14, 2011

ALBANY MOLECULAR RESEARCH, INC., PLAINTIFF,
v.
GEORGE C. SCHLOEMER, ET AL., DEFENDANTS.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Currently before the Court is a Motion to Quash Non-Party Subpoena filed by PGxHealth, LLC ("PGxHealth") and defendant George C. Schloemer. The motion requests that the Court quash plaintiff Albany Molecular Research, Inc.'s ("AMRI") subpoena to the United States Food and Drug Administration ("FDA") to produce "(1) the application submitted by PGxHealth for Vilazodone; (2) the FDA's application file for Vilazodone, and (3) correspondence or notes, whether in paper or electronic format, of meetings between the FDA and PGxHealth concerning Vilazodone." Pl's Sur-Reply at 2 (referencing Ex. C, Defendant and Counterclaim Plaintiff Albany Molecular Research, Inc.'s First Request for Production of Documents to Plaintiff, May 20, 2009). For the reasons set forth below, the Court will deny the motion to quash.

BACKGROUND

This discovery matter arises out of a contractual dispute between AMRI and PGxHealth that is currently pending in both the Northern District of New York ("New York action") and Massachusetts state court ("Massachusetts action"). In March 2007, PGxHealth contracted with AMRI to "develop a viable commercial manufacturing process for the active ingredient in Vilazodone," an anti-depressant drug, with the goal of filing a new drug application ("NDA") with the FDA by late 2009. See PGxHealth and Def. George C. Scholemer's Mot. to Quash Non-Party Subpoena ("Def's Mot.") at 6. Between July 2008 and January 2009, AMRI produced several batches of Vilazodone with "unacceptably-high levels of impurities or the wrong 'polymorph' or crystalline form of Vilazodone." Id. AMRI asserts that "such polymorph problems are not unusual and AMRI was working to solve the problem." Pl's Mem. in Opp'n to Def's Mot. to Quash ("Pl's Opp'n") at 5. In January 2009, PGxHealth notified AMRI that it was terminating the Master Services Agreement ("MSA") for cause and refused to pay the remaining balance on the contract. See Def's Mot. at 6; Pl's Opp'n at 2.

Subsequent to AMRI's termination, PGxHealth entered into an agreement with ScinoPharm Taiwan ("ScinoPharm") to produce the needed samples of Vilazodone. Pl's Opp'n at 2. In April 2009, PGxHealth brought suit against AMRI in Massachusetts state court for breach of contract and for a declaratory judgment stating that PGxHealth was under no contractual obligation to make additional payments to AMRI. See Def's Mot. at 7; Pl's Opp'n at 2. In 2010, AMRI filed suit in the United States District Court for the Northern District of New York against George C. Schloemer, a consultant hired by PGxHealth, for tortious interference with its contractual relations with PGxHealth. Id. AMRI claims that Schloemer was a former board member and consultant for ScinoPharm during the period he was working on the PGxHealth/AMRI contract. See Pl's Opp'n at 2-3.

Roughly a year after terminating the contract, PGxHealth filed its NDA for Vilazodone with the FDA "using registration batches successfully produced" by ScinoPharm. See Def's Mot. at 7. On January 21, 2011, the FDA approved PGxHealth's NDA for Vilazodone to be marketed as an anti-depressant. See Def's Mot. at 8; Pl's Opp'n at 3. During the course of discovery in the Massachusetts action, AMRI requested from PGxHealth all documents and correspondence related to the FDA approval and announcements regarding Vilazodone. See Def's Mot. at 8-9; Pl's Opp'n at 3. PGxHealth objected to AMRI's request, claiming that the request was "overly broad, unduly burdensome and not reasonably calculated to lead to the discovery of admissible evidence." Def's Mot. at 9; Pl's Opp'n at 3. PGxHealth ultimately did produce correspondence with the FDA from January 2011 regarding Vilazodone approval, but has not complied with AMRI's request in full at this time. Id. On February 4, 2011, AMRI served the FDA with a subpoena seeking the production of documents related to the Vilazodone application and approval. See Pl's Opp'n at 3. PGxHealth and defendant George Schloemer then filed the motion to quash now before this Court on February 28, 2011.*fn1

DISCUSSION

Defendant George Scholemer and PGxHealth filed their motion to quash pursuant to Fed. R. Civ. P. 45(c)(3)(B)(i), which permits a court to quash or modify a subpoena if it requires "disclosing a trade secret or other confidential research, development, or commercial information." In determining whether information is protected under Rule 45, courts must evaluate whether the information being sought is the type of commercial information that should not be disclosed to the public. Courts typically consider two factors in analyzing Rule 45 cases, beginning with whether the release of the information would unfairly harm the disclosing party's ability to compete in the marketplace. Falicia v. Advanced Tenant Serv., Inc., 235 F.R.D. 5, 7 (D.D.C. 2006) (referencing Manning Mills, Inc. v. Armstrong World Indus., Inc., 206 F.R.D. 525, 528-29 (D. Del. 2002)). If the disclosed information would unfairly harm the disclosing party's financial health, then the information should be protected from disclosure because "commercial information can be used to directly compete with the disclosing party or, alternatively, might be disclosed by a competitor to decrease the competitive advantage of the commercial information." Id. (citing Echostar Commc'ns Corp. v. News Corp., Ltd., 180 F.R.D. 391, 395 (D. Colo. 1998).

Courts also consider who could potentially receive the disclosed information, assuming "'that disclosure to a competitor is more harmful than disclosure to a non-competitor.'" Id. (quoting Am. Standard Inc. v. Pfizer Inc., 828 F.2d 734, 741 (Fed. Cir. 1987)). Thus, if the court determines that the subpoena requests commercial information, "the burden shifts to the party seeking the information to show that obtaining the information is both relevant and necessary." Id. (referencing Am. Standard, 828 F.2d at 740-41). Ultimately, "[i]f this burden is satisfied, then the court must balance the two competing interests and determine what aspect of the subpoena, if any, will be enforced." Id. (citing Am. Standard., 828 F.2d at 742).

AMRI initially argues that neither PGxHealth nor Schloemer have standing to quash the subpoena because "the only party that has standing to quash a Rule 45 subpoena in the issuing court is the party subpoenaed." Pl's Opp'n at 3 (citing 2 Wright & Miller, Federal Practice & Procedure, § 2463.1 (2010)). However, a party to the underlying action may move to quash the subpoena where the subpoena directly implicates the party's privilege or rights. See Chiperas v. Rubin, 1998 U.S. Dist. LEXIS 23578, *4-5 (D.D.C. 1998); Doe v. Verizon Online, 2010 U.S. Dist. LEXIS 50594, *4-5 (D.D.C. 2010). Although AMRI tries to assert that neither PGxHealth nor Schloemer has any special privilege or right implicated by the documents in question, the Court finds that they have a real and defined interest in the business records requested in the subpoena so as to satisfy the standing requirements. Hence, the Court will consider whether PGxHealth and Schloemer have satisfied the standard under Rule 45 to quash AMRI's subpoena.

PGxHealth and Schloemer argue that the subpoena should be quashed because details regarding how a drug is manufactured, "including a description 'of the drug substance and the final drug product, the general method of preparation and formulation, the analytical methods employed to assure quality and consistency, and the results of stability testing' are 'paradigmatic example[s] of trade secret and confidential information.'" Def's Mot. at 10 (citing Sokolow v. FDA, 1998 U.S. Dist. LEXIS 23672, *10 (E.D. Tex. 1998)). PGxHealth and Schloemer are correct in noting the precarious nature of the requested documents, but the analysis does not end simply because the documents at issue involve confidential information surrounding FDA approval. Because documents that contain confidential material often fall under the broad definition of relevance, the court must strike a balance between the need for the information being sought and the risk to the financial health of the business from production. See Falicia, 235 F.R.D. at 5.

The Court recognizes that some of the requested documents undoubtably contain sensitive material concerning the FDA application and subsequent approval of Vilazodone. However, neither Schloemer nor PGxHealth have demonstrated that AMRI is a direct competitor and that disclosing the redacted material would represent a threat to the financial health of the company. See Falicia, 235 F.R.D. at 10. PGxHealth asserts that AMRI is a "direct competitor" because it is "entitled to receive royalties on worldwide sales of commercialized compounds designed to treat depression." Def's Mot. at 10. PGxHealth and Schloemer attempt to argue that they only learned during discovery in the Massachusetts action that AMRI is a competitor of PGxHealth because AMRI had developed its own pharmaceutical compound designed to treat depression and had "entered into an agreement with Bristol-Myers Squibb ("BMS") for the further development of this compound, and . . . received substantial milestone payments since that time." Def's Mot. at 8.

However, it is quite clear that AMRI's relationship with BMS was publicly disclosed in 2005, two years before PGxHealth and AMRI entered into a contract for the production of Vilazodone. See Pl's Opp'n at 8-9. Furthermore, the fact that AMRI was developing a separate compound for anti-depressant drugs does not make the two companies direct competitors such that the requested information represents the "'lifeblood of [the company's] well being'" and is "critical to the financial health of the non-party's business." Falicia, 235 F.R.D. at 10 (citing In re Vitamins Antitrust Litig., 267 F. Supp. 2d 738, 741-42 (S.D. Ohio 2003)); see also Pl's Ex. B (Affidavit of Roy Swarigen, Jr, Independent Pharmaceutical Consultant, February 24, 2011) (explaining that "simply because two compounds are slated for use as the same class of drug, like an anti-depressant, does not mean that they are 'potential competitors' or similar compounds . . . It is not be [sic] unusual for a large chemical development company to work on dozens, if not hundreds, of drugs that are destined for the same class of use, i.e., as an anti-depressant"). Thus, the Court does not find that AMRI and PGxHealth are direct competitors such that releasing the redacted documents would jeopardize the financial well-being of PGxHealth.

As noted, the parties are currently entangled in litigation in two separate jurisdictions. Although the Court is able to reach the merits of defendant's motion to quash without detailed descriptions of the pending matters in New York and Massachusetts, certain factors are relevant under a proper Rule 45 analysis. There is a protective order in place in the Massachusetts action. It is well settled that a court has broad discretion under Fed. R. Civ. P. 26(c)(7) to determine both whether a protective order is warranted and the necessary restrictions, if any, to be imposed. Aluminum Co. of Am. v. U.S. Dep't of Justice, Antitrust Div., 444 F. Supp. 1342, 1346-47 (D.D.C. 1978) (citing C. Wright and A. Miller, 8 Federal Practice and Procedure, ยง 2043 at 305 (1970)). Specifically, "the court . . . may make any order which justice requires to protect a party or person from annoyance, embarrassment, ...


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