Xu v. FibroGen, Inc.
- Edward Chen
- 3:21-cv-02623
- U.S. District Court · Northern District of California
- 10
In Xu v. FibroGen, Judge Chen denied reconsideration, holding that FibroGen waived privilege over a presentation by delaying its clawback.
FibroGen and the individual defendants must produce the presentation to Plaintiffs within five days; the court held that Defendants waived any attorney-client privilege over it.
What happened
In Xu v. FibroGen, Plaintiffs accused FibroGen and individual defendants of making false or misleading statements about safety data for the experimental drug Roxadustat. The dispute concerned a presentation about Roxadustat’s safety analyses that Defendants had produced to Plaintiffs and the Securities and Exchange Commission.
Defendants asked the court to reconsider its earlier ruling that their disclosure waived attorney-client privilege. They argued that a federal evidence rule protected an inadvertent disclosure if they acted promptly to correct it. The court found that Defendants waited too long to retrieve the presentation after Plaintiffs’ January 26 notice, so the protection did not apply.
Judge Chen granted reconsideration so the issue could be further briefed, but denied Defendants’ motion on the merits. The court held that Defendants waived any privilege over the presentation and ordered them to produce it to Plaintiffs within five days.
The detailed version
- Xu v. FibroGen, Inc. · No. 3:21-cv-02623
- Edward Chen
- May 15, 2023
Background
Plaintiffs brought this securities case against FibroGen, Inc. and individual defendants, alleging false and misleading statements in violation of Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. Plaintiffs alleged that Defendants manipulated safety data and presented skewed data to the Food and Drug Administration in connection with Roxadustat, an experimental drug designed to treat anemia in patients with chronic kidney diseases.
The discovery dispute involved a 17-slide presentation titled “Pooled CV Analysis Update.” Mark Eisner, identified as FibroGen’s Chief Medical Officer, created it at the request of FibroGen’s General Counsel, Michael Lowenstein, to facilitate legal advice from in-house and outside counsel. Defendants stated that a final version was presented to FibroGen’s Board of Directors while counsel provided legal advice.
Defendants produced the presentation to Plaintiffs on December 8, 2022, and had produced it to the Securities and Exchange Commission months earlier. Plaintiffs referred to the presentation in a January 26, 2023 discovery letter and in a January 27 filing. Defendants clawed it back from Plaintiffs on February 3 and from the Securities and Exchange Commission on February 6.
Reconsideration and privilege
In an earlier order, the court held that Federal Rule of Evidence 502(b), rather than the parties’ stipulated protective order, governed waiver. That rule can protect an inadvertent disclosure only if the disclosure was inadvertent, the privilege holder took reasonable steps to prevent disclosure, and the privilege holder promptly took reasonable steps to correct the error.
The court granted Defendants’ motion for reconsideration to allow additional briefing on the Rule 502(b) safe harbor. On reconsideration, the court found that Defendants made a more convincing showing on whether the presentation was privileged and whether they satisfied the first two Rule 502(b) requirements. The court nevertheless held that Defendants failed to satisfy the third requirement: promptly taking reasonable steps to correct the disclosure.
The court concluded that Plaintiffs’ January 26 letter gave Defendants constructive notice that they had produced potentially privileged material. The letter discussed the presentation in its main text, quoted material appearing only in privileged documents, and identified when and by whom the presentation had been given. Defendants did not claw back the presentation from the Securities and Exchange Commission until February 6, an 11-day delay, or from Plaintiffs until February 3, an eight-day delay. The court found neither delay prompt.
The court also rejected Defendants’ argument that their investigation justified the delay. It stated that Defendants could have notified Plaintiffs of a potential privilege claim immediately and investigated afterward. Because Defendants did not promptly take reasonable corrective steps, the disclosure did not qualify for Rule 502(b)’s protection, and Defendants waived any privilege the presentation may have had.
Disposition
The court granted Defendants’ motion for reconsideration but denied the motion on the merits. Judge Edward M. Chen ordered Defendants to produce the presentation to Plaintiffs within five days of the order. The order disposed of Docket No. 172.
Read the full 10-page opinion on CourtListener, the free public archive maintained by the Free Law Project.