The “Self-Critical Analysis” Privilege Protects Against Disclosure of Pharmaceutical Audit in New Jersey
 
June 11, 2007
 

Although the Third Circuit has not yet addressed the existence of a “self-critical analysis” privilege, in a decision in the United States District Court for the District of New Jersey, Magistrate Judge Tonianne J. Bongiovanni allowed the privilege to protect against disclosure of an internal audit performed for a pharmaceutical company. Specifically, in Bracco Diagnostics, Inc. v. Amersham Health Inc., No. 03-6025, 2006 WL 2946469 (D.N.J. Oct. 16, 2006), Magistrate Judge Bongiovanni applied the privilege in denying an informal motion to compel the production of documents concerning a sales and marketing audit performed by PriceWaterhouseCoopers (PWC) for Amersham Health Inc. The audit was conducted for the purpose of assisting Amersham in complying with the many laws and regulations governing the marketing and sales of prescription pharmaceuticals.

The self-critical analysis privilege, or the self-evaluative privilege, was first recognized in the medical malpractice context in Bredice v. Doctors Hosp., Inc., 50 F.R.D. 249 (D.D.C. 1970), aff’d, 479 F.2d 920 (D.C. Cir. 1973). Bracco, 2006 WL 2946469 at *2. The court in Bredice applied a qualified privilege to minutes and reports of hospital staff meetings, recognizing that “‘[c]andid and conscientious evaluation of clinical practices is a sine qua non of adequate hospital care.’” Id. (quoting Bredice, 50 F.R.D. at 250).

The development of the privilege, however, was hampered by the United States Supreme Court decision in University of Pennsylvania v. Equal Employment Opportunity Commission, 493 U.S. 182 (1990). In that case, a unanimous Supreme Court refused to recognize a privilege against the disclosure of “peer review materials” in a Title VII race and sex discrimination suit against the university. In its decision, the Supreme Court “cautioned federal courts to create or expand federal privileges only with extreme reluctance.” Brunt v. Hunterdon County, 183 F.R.D. 181, 184 (D.N.J. 1998) (citing University of Penn., 493 U.S. at 189). Thus, courts have relied on University of Pennsylvania in rejecting the “self-evaluative” privilege. Indeed, citing to the Supreme Court decision, one District of New Jersey decision held that the self-critical analysis privilege should not be recognized as federal common law. Spencer Savings Bank, SLA v. Excell Mortg, Corp., 960 F. Supp. 835 (D.N.J. 1997) (Hedges, U.S.M.J.). Other District of New Jersey cases, however, have recognized the existence of the privilege, but declined to apply it under the circumstances of those cases. See, e.g., Todd v. South Jersey Hosp. Sys., 152 F.R.D. 676 (D.N.J. 1993); Harding v. Dana Transport, Inc., 914 F. Supp. 1084 (D.N.J. 1996).

In light of the Supreme Court’s caution against expanding federal privileges, and because the law in the New Jersey federal courts is unsettled on the existence of the privilege, New Jersey federal courts have resorted to state law for analogy and thus have followed the case-by-case balancing approach espoused by the New Jersey Supreme Court, the state’s highest court, in Payton v. New Jersey Turnpike Authority, 148 N.J. 524 (1997).¹ Hefner v. Hackensack Univ. Med. Ctr., 2003 U.S. Dist. LEXIS 15225 at *5-6 (D.N.J. Aug. 14, 2003); Brunt, 183 F.R.D. at 186-189. The recent Bracco decision reinforces this trend and demonstrates that the privilege is applicable in the context of the highly-regulated pharmaceutical industry.

In determining whether the self-critical analysis was applicable in Bracco, Judge Bongiovanni considered the following six factors: “(1) whether the information is the result of a self critical analysis undertaken by the party seeking protection, (2) the extent to which the information is available from other sources, (3) the degree of harm the litigant will suffer from the information’s unavailability, (4) the possible prejudice to the party asserting the privilege, (5) the public interest in preserving the free flow of the type of information sought, and (6) whether the information is of the type whose flow would be curtailed if discovery were allowed.” Bracco, 2006 WL 2946469 at *3.

With respect to the first factor, the Court was satisfied that the purpose of the PWC audit was to ensure compliance with government regulatory requirements. Id. at *4. As for the second factor, the Court found that there was no alternate source and that this factor leaned in favor of production. Id. The third and fourth factors required the Court to balance the prejudice of disclosure versus nondisclosure. Amersham argued that it would be discouraged from conducting any similar investigations in the future if the results of such investigations could be used against it in litigation. The plaintiff, Bracco Diagnostics, Inc., responded that pharmaceutical companies are required, as a matter of good routine and good business practice, to constantly analyze their practices. The Court found that Amersham would be prejudiced to a greater degree from disclosure than Bracco would be from nondisclosure. Id. at *5. The Court also noted that Bracco would suffer less prejudice from nondisclosure given that it had access to the factual information underlying the PWC report. Id.

In considering the fifth factor, the Court analogized the self-critical analysis privilege to the subsequent remedial-measure rule, embodied in Federal Rule of Evidence 407. The Court noted that the policy underlying Rule 407 – to encourage, and not discourage, people from taking steps in furtherance of safety – is similar to that underlying the privilege (i.e., the “need to promote candid and forthright evaluation.”) Id. at *6 (quotation marks omitted). The Court stated:

[I]t is in the public interest for organizations, when faced with a possible violation of law or government regulation intended to protect the public, to attempt to expeditiously determine the causes and results, and correct them accordingly. The flow of information of this type is crucial to protection of the public-at-large from so-called “breakdowns in the system.”

Id. at *7. The Court viewed the PWC report as a “step in furtherance of added safety” and found that the subjective analysis contained therein was of the type of information whose free flow is in the public interest. Id.

Finally, under the sixth factor, the Court found that allowing disclosure would have a chilling effect and create the Hobson’s choice where an organization would expose itself to civil liability if it chose to investigate and correct violations. Thus, the Court found that the sixth factor weighed in favor of Amersham. Id.

Ultimately, after applying each of the six factors, Magistrate Judge Bongiovanni found that the PWC report was protected by the self-critical analysis privilege and denied the informal motion to compel its production. Id. at *8.

Bracco demonstrates that the self-critical analysis privilege can be invoked in the District of New Jersey in appropriate cases to protect against disclosure of compliance reports. However, because neither the Third Circuit nor the United States Supreme Court has yet recognized the existence of this privilege, organizations should structure their compliance programs in such a way so that they also come within the confines of the attorney-client privilege and, where possible, the attorney-work-product doctrine.

 

For more information, e-mail Roseann Bassler Dalpra at roseann.dalpra@hklaw.com or call toll free, 1-888-688-8500.

 

¹ In Payton, the New Jersey Supreme Court declined to formally adopt the self-critical analysis privilege and instead held that a “case-by-case balancing is more appropriate in accommodating self-critical analysis than is a per se privilege.” 148 N.J. at 545, 547-48.