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Stanford University Law School - Securities Class Action Clearinghouse

Gerald W. Palmer (State Bar No. 58968 )
James L. Poth (State Bar No. 185042)
JONES, DAY, REAVIS & POGUE
555 West Fifth Street, Suite 4600
Los Angeles, California 90013-1025
Telephone: (213) 489-3939

Robert C. Micheletto
Eric Berlin
Susan L. Winders
JONES, DAY, REAVIS & POGUE
77 West Wacker Drive, Suite 3500
Chicago, Illinois 60601-1692
Telephone: (312) 789-3939

Attorneys for Defendants DIGNITY PARTNERS, INC.

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA


 
HOWARD HERTZBERG, et al., On Behalf
of Themselves and All Others Similarly
Situated,

                      Plaintiffs,

           v.

DIGNITY PARTNERS, INC., et al.,

                      Defendants.
 

____________________________________

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)		 Case No. C-96-4558-CAL

CLASS ACTION

DEFENDANT'S RESPONSE TO
PLAINTIFFS' EXPEDITED MOTION TO
COMPEL PRODUCTION OF
DOCUMENTS
[filed Jan. 27, 1999]

Date: Not Set
Time: Not Set
Dept.: The Honorable Charles A. Legge

I. INTRODUCTION

Contrary to the implications of plaintiffs' motion, there is no dispute that the documents in issue -- records held by Dignity relating to each of the individuals whose life insurance policies were purchased by Dignity -- are relevant and should be produced in order to allow this case to be resolved on the merits. What is in dispute, and what plaintiffs fail to adequately advise the Court concerning, is the procedures to be followed to protect the privacy of the individuals whose records are sought and to protect Dignity from any liability to those individuals for any disclosure.1

Disclosure of information regarding individuals with HIV and/or AIDS is highly regulated by state law. Certain state laws give individuals the right to consent (or not) to any disclosure and the right to pursue civil remedies and penalties against anyone who makes impermissible disclosure. Thus, if Dignity simply turns the documents over to plaintiffs' counsel, it runs an unacceptable risk that it -- and perhaps even plaintiffs and their counsel -- will be subjected to litigation by the individuals or their survivors, and the additional risk that compliance with Rule 34 of the Federal Rules does not inherently provide a defense in cases brought by sympathetic plaintiffs under state law.

Accordingly the issues presented are (1) whether an order of this Court should issue compelling Dignity to produce the requested documents; and (2) whether such order should require notice and an opportunity to object to the interested individuals. Finally, if the Court determines that notice is required, its order should require plaintiffs to bear the burden of providing the requisite notice as plaintiffs are seeking the documents this procedure will yield.

II. STATEMENT OF FACTS

Although the relevance of the documents at issue is uncontested, plaintiffs waste a great deal of ink outlining their unfounded, and ultimately unprovable, allegations. Plaintiffs' now familiar accusations regarding Dignity's capitalization and the accounting methods it used to recognize income are completely immaterial to the matter at hand. Plaintiffs' election to use a motion concerning the privacy rights of individuals suffering from AIDS as a forum for once again discussing these issues cannot diminish the fact that Dignity's method of accounting, as well as its level of capitalization, were both disclosed to the public by means of its prospectus. (Decl. of Poth ¶ 2, Exhibit "A," p. 22.) It can only be surmised that plaintiffs used this opportunity to again advance these ultimately baseless allegations in the belief that they will somehow gain legitimacy through repetition.

The facts that do have some bearing on the motion at bar are those relating to the privacy interests of third parties and their relation with Dignity. However, plaintiffs' moving papers fail to clearly or accurately relate these facts.

The privacy interest at issue revolves around the right of non-parties to control access to their own medical records and to prevent the release of information identifying them as individuals suffering from AIDS. The vast majority of individuals who sold their life insurance policies to Dignity were suffering from AIDS. In order to evaluate the value of these policies Dignity's consultants examined each viator's medical records. (Decl. of Poth ¶ 2, Exhibit "A.") Plaintiffs' efforts to gain access to these records directly implicate the right of these non-parties to maintain the confidentiality of this information. The individuals with whom Dignity conducted business pre-authorized the disclosure of these documents to Dignity's authorized representatives and agents. (Tattersall Decl., Exhibit "C.") As plaintiffs correctly observe, this authorization allowed Dignity and its consultants to conduct necessary reviews of the individual's medical records.

Contrary to plaintiffs' assertions, however, at no time did any of the viators consent to disclosure to plaintiffs of the documents subject to this motion. Plaintiffs' assertion that viators consented to the release of extremely personal information to shareholders by agreeing that "aggregate or statistical information" could be released does violence to the English language. The instant motion is not addressed to aggregate or statistical information, which by its very nature would not identify any specific person or disclose individual medical records. Nor could anyone reasonably be expected to read the phrase "aggregate and statistical data" as serving to pre-authorize the release of individual medical records. This fact is especially the case where the release at issue expressly authorized Dignity's agents to review medical records in contrast to the consent to disclose "aggregate data" to shareholders. (See Decl. of Tattersall, Exhibit "C.") Plaintiffs' repeated attempt to point to this language as amounting to an advanced authorization to release the information they seek constitutes nothing more than linguistic slight of hand.

Plaintiffs' attempt to avoid the difficult privacy issues involved by pointing to Dignity's forms only highlights the problem faced by both the litigants and the Court in seeking to allow discovery of this relevant material. At least one of the states where Dignity's business was concentrated, New York, requires viatical companies to obtain the specific written consent of viators before releasing their personal information. (Decl. of Poth ¶ 2, Exhibit "A," p. 12.)2 Thus, far from mitigating the privacy concerns giving rise to the instant motion, the conduct of Dignity's business only serves to highlight them.

Plaintiffs also make much of the fact that Dignity and its viators dealt with each other in a commercial, rather than a strictly charitable or medicinal, context. This fact, although true, does nothing to lessen the privacy concerns at issue. The fact that an individual discloses confidential information to another in a relationship where money is exchanged does not void the privacy interests at issue. This is especially true in the situation faced here where statutes provide that further disclosure of confidential information received from an individual can only be made with his or her specific written authorization.

III. ARGUMENT

Dignity's concerns in responding to this motion are to ensure that the Court is fully apprised of the privacy interests implicated by plaintiffs' discovery requests and to seek an order that will protect the individuals whose records are sought as well as the parties to this litigation. This concern arises from the fact that the strong public policy of protecting the privacy of AIDS victims led to the enactment of legislation in many of the states Dignity conducted business prohibiting disclosure of the information plaintiffs seek. California provides significant penalties for violation of this legislation and several courts have recognized a private cause of action for disclosing such sensitive material. Although plaintiffs acknowledge that their discovery requests implicate significant privacy concerns, plaintiffs fail to address the strong public policy considerations or the fact that producing the requested information in the absence of a court order might expose Dignity to claims by third parties.

Several courts have gone so far as to hold that the very information sought by plaintiffs, documents identifying individuals suffering from AIDS, is not discoverable. Doe v. American Nat. Red Cross, 788 F. Supp. 884, 889 (D.S.C. 1992) (identity of blood donor suffering from AIDS was privileged and, therefore, beyond the scope of permissible discovery); Borzillieri v. American Nat. Red Cross, 139 F.R.D. 284, 289 (W.D.N.Y. 1991) (Adopting protective order precluding discovery of identity of blood donor suffering from AIDS). Dignity does not, however, seek to prevent plaintiffs from obtaining access to the information subject to this motion.3 Rather, Dignity seeks to ensure that this access is not obtained in a manner that would violate the privacy rights of third parties and thereby possibly subject Dignity to the prospect of future litigation. The Court can ensure that this result is avoided by considering this unique situation when entering its order.

Although there is some appeal to plaintiffs' argument that California's AIDS Research Confidentiality Act ("Act") does not apply, that argument is necessarily based on the fact that Dignity was a business venture. The Act expressly provides that "[r]esearch records, in a personally identifying form, developed or acquired by any person in the course of conducting research or a research study relating to [AIDS] shall be confidential, and these confidential records shall not be disclosed by any person in possession of the research record, nor shall these confidential research records be discoverable. . ." Cal. Health & Safety Code § 121075 (emphasis supplied). Any disclosure that does take place requires the prior written consent of the research subject. Id. at § 12080. Violation of the Act carries a possible fine of between $1,000 and $5,000. Id. § 12110(a) (This provision does not reveal whether this penalty is for each violation, but does apply to "any disclosure"). As a result, although Dignity does not believe that the Act applies, it does have a legitimate concern with protection from adverse consequences in the event its view is not correct.

A conclusion that the Act does not apply to Dignity probably cannot rest simply on the fact that Dignity and the viators with whom it dealt interacted in a commercial context. The express terms of the Act do not limit its application in such a manner. To the contrary, the Act applies to "any person." Giving this term its plain meaning prevents limiting the Act to research conducted by physicians or that is completed outside of any profit-seeking venture. However, Plaintiffs' assertion concerning the absence of a medicinal or clinical relation between Dignity and its viators would nevertheless provide grounds for holding that the Act does not apply in this instance if the underlying purpose of the Act is understood as encouraging AIDS victims to participate in studies and research directed to developing treatments or understanding the spread of the disease. Such a legislative intent can be discerned from the fact that the statute's first use of the term "any person" is immediately qualified by the phrase "in the course of conducting research or a research study related to [AIDS]." As a result, Dignity's concerns with the application of this Act could be alleviated by a finding that the term "any person" was intended to apply only to those conducting such research, not to entities who obtained information from AIDS victims for no other reason than completing a commercial transaction.

Plaintiffs do not dispute that the information they seek is subject to Constitutionally-protected privacy rights.4 However, plaintiffs attempt to diminish the significance of non-parties' privacy rights by asserting that the public policy underlying this nation's securities regulations is paramount. Dignity's concern with this assertion is that the statutory restrictions on the disclosure of information sought by plaintiffs, as well as the liability recognized for such disclosure by several courts, leaves plaintiffs' conclusion far from clear. It would appear that the only mechanism for fully alleviating these concerns is either a finding that plaintiffs do, in fact, have a compelling need, or requiring plaintiffs to compensate Dignity for notifying the individuals whose medical records are sought.

Plaintiffs argument that only "good cause" need be shown falls wide of the mark. As an initial matter, the authority plaintiffs cite for this proposition was vacated by the Supreme Court. Doe v. Attorney Gen., 941 F. 2d 780 (9th Cir. 1991), vacated 518 U.S. 1014, 116 S.Ct. 2543, 135 L.Ed. 1064 (1996). What is perhaps more significant, however, is the fact that several of the states in which Dignity conducted business appear to require a showing of compelling need before the records at issue can be disclosed. In New York, where Dignity conducted a significant amount of business, the legislature "passed a very strong confidentiality law to prevent HIV carriers from having their HIV status revealed." Borzillieri, 139 F.R.D. at 290.5 The confidentiality law provides that a court may only "grant an order for disclosure of confidential HIV-related information upon an application showing: (a) a compelling need for disclosure of information for the adjudication of a criminal or civil proceeding. . . " N.Y. Pub. Health Law § 2785 (McKinney 1997).6

Although the Borzillieri court observed that a "compelling need" could be established when a plaintiff's case was entirely dependent on obtaining the discovery at issue, plaintiff there did not seek documents specifically identifying an AIDS victim. 139 F.R.D. at 290. Other New York authority suggests a higher standard for finding a "compelling need" when the identity of an AIDS victim is sought. Application of Gribetz, 605 N.Y.3d 834 (1994) (criminal defendant's HIV status required in order to establish that he acted with depraved indifference to human life); People v. Anonymous, 582 N.Y.S.2d 350 (1992) (compelling need established where defendant's HIV status was required to determine if he had placed bite victims in a life threatening situation). Given the state of the law governing disclosure of the information plaintiffs seek, it is clearly plaintiffs' burden to articulate a "compelling need." As a consequence, any order directing Dignity to disclose personally identifying information concerning AIDS victims should come only after such a "compelling need" is found.

Compliance with the instant discovery in the absence of a court order raises the possibility that Dignity might face future litigation from surviving viators, and perhaps the estates of those who are deceased. In New York, a private right of action for disclosing an individual's HIV status in violation of statutes governing disclosure was recognized in Nolley v. County of Erie, 776 F.Supp. 715 (W.D.N.Y. 1991); see also V. v. State, 566 N.Y.S.2d 987 (1991); Doe v. Roe, 599 N.Y.S.2d 350, 355 (1995) (fact that HIV information was disclosed pursuant to a subpoena provides no defense to private cause of action based on violation N.Y. Pub. Health Law § 2782). California has also recognized that a private right of action may arise when personally identifying AIDS information is wrongfully disclosed. Urbaniak v. Newton, 226 Cal. App. 3d 1128, 1140 (1991). The decision in Urbaniak also found that this cause of action was not abated by the death of the AIDS victim. Id. at 1141. As a result, although Dignity does not oppose producing documents responsive to plaintiffs' document request, acquiescence to this request without first seeking an appropriate judicial determination that privacy interests of the viators are protected and the statutory restrictions on disclosure have either been complied with or are not implicated, might subject Dignity to potential future litigation. In the absence of any viable rationale for avoiding the application of the statutory regimes discussed above, it is necessary to consider how this relevant information can be produced. All of the statutes discussed above permit disclosure if the affected individual either gives written consent or is provided with a reasonable opportunity to object. N.Y. Ins. Law § 7808(c)(4) (allowing written consent); Cal. Health & Safety Code § 12080 (same); Fla. Stat. Ch. 381.004(3)(e)(9) (providing for notice and opportunity to be heard). Additionally, California's requirement for providing notice to non-parties whose private information is sought in discovery contemplates a similar procedure. Calif. Practice Guide, Federal Civil Procedure Before Trial, § 11:79.1 ("[T]he special notice provisions under state law are designed to protect a substantive right under state law (privacy). Thus, arguably, the state court 'procedure' [contained in Calif. Code of Civil Pro. § 1983.5] should be followed [in federal discovery.]") However, given the fact that this process would involve more than a thousand individuals or their estates, this option may not be financially or logistically viable.

Although redacting the names of viators would allow production of documents without disclosing personally identifying information, this procedure is fraught with its own difficulties. Redaction would be both extremely time consuming and costly. Moreover, as plaintiffs correctly point out, this process cannot assure complete success and would likely lead to confusion. However, in the absence of a determination that the restrictions discussed above do not apply in this context, or providing notice to the viators, redaction would be the only remaining means of allowing for the production of these relevant documents.

In either event, as plaintiffs have elected to pursue this litigation, plaintiffs should be required to shoulder the burden of facilitating their access to these documents. As with notice to the class, this notice simply constitutes part of the ordinary burden plaintiffs must bear. See In Re Ml-Lee Acquisition Fund II, L.P. Litigation, 149 F.R.D. 506-508 (D. Del. 1993)(observing that class representatives "must bear the substantial costs of serving notice on more that 33,000 potential class members, as well as the substantial costs of engaging in extensive discovery.") At the same time, Dignity should not be required to absorb this expense merely based on plaintiffs' unsubstantiated allegations and plaintiffs' desire to view the documents.

Alternatively, if plaintiffs and their counsel are confident that Dignity would face no possibility of future litigation as a result of producing the medical records sought here without the notice discussed above, they should be willing to indemnify Dignity against such a possibility.

IV. CONCLUSION

Although the documents sought by plaintiffs are relevant, they are also subject to privacy concerns. Unless these concerns can be addressed by a finding that the statutory, constitutional, and tort restrictions on disclosure are not implicated, plaintiffs should compensate Dignity for the cost of compliance or indemnify it against any future claims.
 
Dated: January 26, 1999 Respectfully submitted,

JONES, DAY, REAVIS & POGUE

By: _______________________________
    Gerald W. Palmer
    James L. Poth

Attorneys for Defendants
DIGNITY PARTNERS, INC., et al.

1 Pursuant to stipulation of counsel, the five page limit imposed by Local Rule 7-10(d)(1) has been extended in order to allow full briefing of the issues involved.

2 See N.Y. Ins. Law § 7808(c)(4)(McKinney 1997) ("Viatical settlement companies . . . shall not . . . disclose medical, financial or other personal information obtained from the viator to any one person or entity without the viator's specific written consent."); see also N.Y. Codes R. & Regs. tit. 11, § 380.8(d) (requiring viatical settlement company to disclose to viators that their personal information will not be disclosed without their specific written consent.)

3 Indeed, as plaintiffs correctly point out, the documents subject to this motion may very well serve to exonerate defendants. However, in the absence of a stipulation waiving the right to examine original documents constituting the "aggregate and statistical" data which is available to plaintiffs, the issue addressed here will have to be resolved in any event. Fed. Rule of Evid. 1006.

4 By the same token, Dignity agrees that its release from its viators, as well as regulations governing viatical companies in most of the states where it conducted the majority of its viatical business, permit disclosure if required by court order. Cal. Ins. Code § 791.13(h); N.Y. Pub. Health Law § 2782(1)(a); Ga. Code 33-39-14(8); Tx. Health & Safety Code § 81.103(d); Decl. of Tattersall, Exhibit C.

5 Viatical settlement companies were made subject to New York's confidentiality law governing health care providers by N.Y. Ins. Law § 7808(b).

6 A similar restriction was also adopted by Florida where Dignity also conducted business. Fla. Stat. Ch. 381.0049(3)(e)(9) (providing for the disclosure by a person who has obtained knowledge of an AIDS test result upon a showing of compelling need after the subject of the test is given notice and an opportunity to participate in the proceedings.) (Decl. of Poth & 2, Exhibit "A," page 12.) Unfortunately, plaintiffs moving papers fail to address either of these restrictions or the possible application of legislation in other states where Dignity conducted business. See, e.g. Ga. Code 33-39-14; Tx. Health & Safety Code § 81.103.
 

Source: Diskette file from Jones, Day, Reavis & Pogue LLP