Kraft et al v. Essentia Health et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
Jessica Kraft, et al.,
Plaintiffs,
vs.
Essentia Health, et al.,
Defendants.
ORDER
Case No. 3:20-cv-121
Before the Court is an objection and notice of appeal from court’s order (Doc. No. 181)
filed by Defendants Essentia Health and Innovis Health, LLC, d/b/a Essentia Health West,
(collectively, “Essentia”) on May 23, 2022. Essentia appeals United States Magistrate Judge Alice
R. Senechal’s May 9, 2022, order regarding a discovery dispute (the “May 9 Order”). Docs. No.
188, 190. On May 31, 2022, Plaintiffs Jessica Kraft, et al. (“Plaintiffs”), filed a response in
opposition. Doc. No. 193. For the following reasons, Essentia’s appeal is denied.
I. 	BACKGROUND
The Court is quite familiar with the allegations and claims in this case. Indeed, this is the
second appeal from a discovery dispute this Court has addressed. In short, Plaintiffs brought this
putative class action alleging that Essentia sold and administered injectable pharmaceuticals—
time and temperature sensitive pharmaceutical products—that had been stored outside the proper
temperature range.1 See Doc. No. 92. Plaintiffs assert multiple claims and seek to recover for
economic loss. Id.
This case is still in discovery. Plaintiffs served various discovery requests on Essentia,
including requests for production of documents. As part of its response to these discovery requests,
1 Plaintiffs first filed their complaint on July 10, 2020. Doc. No. 1. On January 25, 2021, Plaintiffs
filed their amended complaint. Doc. No. 28. Plaintiffs then filed a second amended complaint on
August 16, 2021. Doc. No. 92.
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Essentia asserted various privileges to several documents, including “the peer review/quality
assurance privilege.”2 Doc. No. 57-1, pp. 5, 7. Under Federal Rule of Civil Procedure
26(b)(5)(A)(ii), a party withholding documents on the basis of privilege must describe the withheld
documents with enough detail to “enable other parties to assess the claim” but need not reveal
“information itself privileged or protected.”
As Judge Senechal fittingly explained, “[s]triking this balance has proved difficult.” Doc.
No. 181. By way of review, Judge Senechal issued a discovery order on August 2, 2021, addressing
the sufficiency of Essentia’s privilege and supplemental privilege log (the “August 2 Order”). Doc.
No. 79. Pursuant to the August 2 Order, Essentia was directed to produce a more specific privilege
log that included:
(1) the date on which it was created, (2) identity of the person who created it and
the position held by that person at the time the document was created, (3) identity
of persons who received the document and their positions, (4) a description of the
subject matter of the document, (5) inclusive document identification numbers, and
(6) specific reference to the portion of the North Dakota or Minnesota privilege the
document is asserted to meet.
Id., p. 12-13. Essentia appealed the August 2 Order to this Court, and it was affirmed. Doc. No.
109. Essentia then filled an interlocutory appeal and sought a writ of mandamus in the United
States Court of Appeals for the Eighth Circuit, both of which were dismissed and denied
respectively. Doc. No. 113.
With the first appeal resolved, discovery continued. During a status conference, Plaintiffs
argued, among other things, that the privilege log provided by Essentia contained insufficient detail
as to the subject matter descriptions. Doc. No. 128. Recognizing the August 2 Order did not include
a specific directive regarding the level of detail required as to the subject matter descriptions, Judge
2 For ease of reference, the Court refers to “the peer review/quality assurance privilege” as “peer
review privilege.”
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Senechal issued an order on October 14, 2021, directing Essentia to “provide additional detail,
specific to each document over which it claims the privilege.” Doc. No. 129. Essentia complied.
See Doc. No. 161-1.
Still unsatisfied with Essentia’s supplemental privilege log, Plaintiffs filed a motion to
compel production of documents withheld as privileged on January 24, 2022 (the “Motion to
Compel”) and requested sanctions. Doc. No. 161. In that motion, Plaintiffs argued that Essentia
failed to establish that any of the withheld documents are privileged. See id. In response, Essentia
argued it “complied with this Court’s previous Orders requiring it to produce additional detail in
its supplemental privilege logs” and that there is no basis on this record to require disclosure of
the documents that Essentia has withheld as privileged. Doc. No. 169. Essentia further argued, in
the alternative, that the Court should conduct an in-camera review of the documents identified in
Essentia’s supplemental privilege log “should the Court require additional information.” Id.
After briefing on the Motion to Compel was concluded but before the Court issued an
order, the North Dakota Supreme Court issued a decision in St. Alexius Medical Center v.
McKibbage, 2022 ND 65, 971 N.W.2d 878. In that case, St. Alexius Medical Center challenged a
state district court’s order that compelled disclosure of allegedly privileged information, under
North Dakota’s peer review privilege, on a privilege log. Considering McKibbage, Judge Senechal
ordered supplemental briefing. Doc. No. 175.
In its supplemental brief, Essentia argued that the Court’s August 2 Order and October 14
Order “requiring the disclosure of additional details in Essentia’s privilege logs for documents for
which Essentia asserted application of the [peer review privilege] are inconsistent with the North
Dakota Supreme Court’s decision in McKibbage.” Doc. No. 178, p. 2. Without formally moving,
Essentia asked that the Court, given McKibbage:
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vacate its August 2, 2021, and October 14, 2021, Orders, order Plaintiffs’
destruction of Essentia’s supplemental privilege logs, precluding their further use
in this case or otherwise, and seal any reference to the privileged information
contained in Essentia’s supplemental privilege logs already filed or of record to
prevent further dissemination of such privileged information. Essentia also seeks a
stay of this Court’s August 2, 2021, and October 14, 2021, Orders as they relate to
the requirement to produce supplemental privilege logs pursuant to the Court’s
Order Governing Discovery of Electronically Stored Information.
Id. Plaintiffs argued that McKibbage is inapplicable because this case is governed by Minnesota’s
peer review privilege law, not North Dakota’s peer review privilege. Doc. No. 180, p. 3.
With the supplemental briefing concluded, Judge Senechal issued the May 9 Order, which
resolved the motion to compel, as well as issues raised by the parties as to the impact of
McKibbage. Doc. No. 181. In the May 9 Order, Judge Senechal conducted a thorough choice of
law analysis and ultimately found that Minnesota’s (rather than North Dakota’s) peer review
privilege applied. Id. Thus, Judge Senechal determined that that McKibbage did not apply and was
distinguishable. Id. Additionally, as to the motion to compel, Judge Senechal found “it necessary
to conduct in-camera review to determine whether documents Essentia has withheld are privileged
under Minnesota’s peer review privilege or under any other asserted privilege.” Id., p. 32. She
invited the parties to each select up to fifty (50) of the documents listed on Essentia’s privilege log
for the Court’s review, with Plaintiffs selecting their documents by May 23, 2022, and Essentia
selecting its documents by June 13, 2022.3 Id. Judge Senechal also denied Plaintiffs’ motion to
compel, to the extent that Plaintiffs’ requested the Court order Essentia to disclose all documents
over which it had claimed privilege, and denied Plaintiffs’ request for an award of fees and costs
incurred in connection with that dispute. Id., p. 31. Essentia appealed.
3 Judge Senechal also granted Essentia’s motion for stay to the extent that Essentia “will not be
required to produce additional supplemental privilege logs until the court’s in camera review
process has been completed” and held in abeyance “all other matters not addressed in the court’s
conclusion pending the completion of the in camera review process.” Doc. No. 181, p. 32.
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II. 	STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 72(a) and District of North Dakota Civil Local
Rule 72.1(B), a magistrate judge is permitted to hear and determine non-dispositive matters in a
civil case. Any party may appeal the determination to the district court judge assigned to the case
who “must consider timely objections and modify or set aside any part of the order that is clearly
erroneous or is contrary to law.” Fed. R. Civ. P. 72(a); see also D.N.D. Civ. L. R. 72.1(D)(2). “A
district court conducts an ‘extremely deferential’ review of a magistrate judge’s ruling on a
nondispositive issue.” Carlson v. BNSF Ry. Co., No. 19-CV-1232, 2021 WL 3030644, at *1 (D.
Minn. July 19, 2021). As such, a magistrate judge’s decision will not be disturbed unless the
“clearly erroneous” or “contrary to law” standards are met. See Fed. R. Civ. P. 72(a); see also
Jones v. City of Elkhart, Ind., 737 F.3d 1107, 1115 (7th Cir. 2013). A magistrate judge’s finding
is clearly erroneous when, although there may be some evidence to support it, the reviewing court,
after considering the entirety of the evidence, is “left with the definite and firm conviction that a
mistake has been committed.” Dixon v. Crete Med. Clinic, P.C., 498 F.3d 837, 847 (8th Cir. 2007)
(quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)). “A decision is contrary to
law when a court fails to apply or misapplies relevant statutes, case law or rules of procedure.”
Shank v. Carleton Coll., 329 F.R.D. 610, 613 (D. Minn. 2019). The burden of showing a ruling is
clearly erroneous or contrary to law rests with the party filing the appeal. Marks v. Struble, 347 F.
Supp. 2d 136, 149 (D.N.J. 2004).
III. 	LEGAL DISCUSSION
As part of its argument that the May 9 Order is “erroneous and contrary to law,” Essentia
raises several issues on appeal. Doc. No. 188. Essentia first argues that the May 9 Order
“improperly determined that North Dakota law does not apply to Essentia’s assertion of [the peer
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review privilege].” Id. Essentia next asserts that, contrary to the North Dakota Supreme Court’s
recent decision in McKibbage, “the May 9 Order declined to vacate prior orders requiring Essentia
to provide a detailed privilege log in violation of applicable [peer review statutes].” Id. Finally and
alternatively, Essentia seeks certification of the choice-of-law issue to the North Dakota Supreme
Court. Id.
Choice of Law
Essentia’s first argument presents a choice of law issue—namely whether North Dakota’s
peer review privilege (as opposed to or in addition to Minnesota’s peer review privilege) applies.
Pursuant to Federal Rule of Evidence 501, “state law governs privilege regarding a claim or
defense for which state law supplies the rule of decision.” Fed. R. Evid. 501. Here, the Court has
jurisdiction based on diversity of citizenship, and as such, state law provides the rule of decision
and governs the existence and scope of any privilege. In re Baycol Prod. Litig., 219 F.R.D. 468,
469 (D. Minn. 2003) (citation omitted). Because Rule 501 is silent as to which state’s law governs,4
the Court will apply the forum’s choice of law rules. See Wellin v. Wellin, 211 F. Supp. 3d 793,
800 (D.S.C. 2016), order clarified, No. 2:13-CV-1831-DCN, 2017 WL 3620061 (D.S.C. Aug. 23,
2017).
A choice of law analysis, however, is only necessary if the laws of two states (here, North
Dakota and Minnesota) conflict. Essentia maintains its position that “no outcome-determinative
conflict exists between North Dakota and Minnesota law on the application of [peer review
4 The parties do not dispute the applicable North Dakota and Minnesota statutory authority
pertaining to each state’s respective peer review privilege. Thus, the Court incorporates by
reference the relevant North Dakota and Minnesota statutes relied on by Judge Senechal in the
May 9 Order. See Doc. No. 181 pp. 4-11 (citing N.D. Cent. Code § 23-34-01; N.D. Cent. Code §
23-34-03; Minn. Stat. § 145.61(5); Minn. Stat. § 145.64).
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privilege] on these facts,” and accordingly a choice-of-law analysis is unnecessary. Doc. No. 188.
The Court disagrees.
As explained by Judge Senechal, North Dakota’s and Minnesota’s peer review privilege
statues have differing definitions of “peer review organization” sufficient to generate a conflict.
Doc. No. 181, pp. 15-16. Chiefly, North Dakota’s more expansive definition of peer review
organization, among other things, creates a sufficient outcome determinative conflict between it
and Minnesota’s narrower definition. See id., pp. 14-17. After independently reviewing the
applicable statutes and considering Judge Senechal’s rigorous analysis, the Court is not “left with
the definite and firm conviction that a mistake has been committed” nor is it convinced that the
relevant statutes, case law, or rules of procedure were misapplied. As such, the Court finds that
Essentia has not met its burden to show that Judge Senechal’s conclusion is erroneous or contrary
to law.
Having established a sufficient conflict, the next step of the analysis requires the Court to
determine which state’s law applies. The Court has independently and carefully reviewed and
considered the authority cited by the parties and Judge Senechal. To that end, all parties appear to
agree that North Dakota case law has not specifically addressed which choice-of-law methodology
courts should apply when specifically analyzing privilege laws. In the absence of any controlling
authority, the Court is not persuaded that Judge Senechal’s prediction that the North Dakota
Supreme Court would apply an interest-based choice of law approach,5 as articulated in Nodak
5 As recognized by Judge Senechal, “The North Dakota Supreme Court refers to its choice of law
rule as the ‘significant contacts test,’ though it also considers choice-influencing considerations.”
Doc. No. 181, p. 21 n.15 (quoting Daley, 587 N.W.2d at 161). Judge Senechal refers to this method
as an “interest-based” choice of law rule. See Doc. No. 181, p. 21. For the purposes of this appeal
and to maintain clarity, the Court will also refer to North Dakota’s choice of law methodology as
an “interest-based” choice of law rule.
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Mut. Ins. Co. v. Wamsley, 2004 ND 174, 687 N.W.2d 226, when analyzing privilege laws is
erroneous or contrary to law. Indeed, while North Dakota has not yet decided what choice of law
methodology applies in privilege cases, the Court agrees with Judge Senechal that cases such as
Issendorf v. Olson, 194 N.W.2d 750 (N.D. 1972) (applying North Dakota’s significant contacts
test in a case involving contributory negligence and assumption of the risk), Daley v. Am. States
Preferred Ins. Co., 1998 ND 225, ¶ 11, 587 N.W.2d 159 (reviewing the evolution of North
Dakota’s significant contacts test and applying this method in a case involving no-fault benefits),
Wamsley, 2004 ND 174, ¶ 9 (applying North Dakota’s significant contacts test in addressing
whether coverage under insurance policies could be stacked), Am. Fam. Mut. Ins. Co. v. Farmers
Ins. Exch., 504 N.W.2d 307, 311 (N.D. 1993) (applying North Dakota’s significant contacts test
in a case involving which states no-fault law should apply to determine the availability of
subrogation), support the proposition that North Dakota would likely apply an interest-based
approach. Therefore, without any binding authority to the contrary, “[t]here is little reason to think
the North Dakota Supreme Court would reverse course and apply a choice of law rule for privileges
that is no longer applies in other contexts.” Doc. No. 181, p. 20.
Essentia next argues that even “assuming in arguendo that North Dakota would adopt an
interest-based test for privileges, the May 9th Order is in error in concluding that the test does not
demand application of North Dakota law.” Doc. No. 188, p. 13. Again, the Court disagrees. True
enough, as Essentia emphasizes and Judge Senechal acknowledged, the majority of Plaintiffs are
North Dakota residents (but include some Minnesota residents) and the majority of the claims arise
under North Dakota law (but include some claims arising under Minnesota law). Doc. No. 181, p.
24. Yet, even with Innovis having its principal place of business in North Dakota, the fact of the
matter is that Essentia contends that it (and not a more limited committee or entity) is the relevant
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peer review organization under either North Dakota or Minnesota law. And Essentia is a Minnesota
entity that is “headquartered and incorporated in Minnesota.” Id., p. 23. As the relevant peer review
organization, Essentia is claiming the privilege. Applying the interest-based choice of law
methodology to these contacts, along with the contacts highlighted by Judge Senechal in the May
9 Order, the Court finds Judge Senechal’s conclusion that the Minnesota’s peer review privilege
applies is not erroneous or contrary to law. In particular, the Court agrees that the first choice-
influencing consideration, predictability of results, weighs in favor of applying Minnesota law. As
Essentia is claiming the peer review privilege, it should reasonably expect to be subject to privilege
laws of the state in which it is headquartered and incorporated (Minnesota). Similarly, the fourth
choice-influencing factor, advancement of the forum’s governmental interest, also weighs in favor
of Minnesota law. While both Minnesota and North Dakota have a “strong public interest in
improving health care by granting certain protections to medical review organizations,” see Larson
v. Wasemiller, 738 N.W.2d 300, 312 (Minn. 2007); Trinity Med. Ctr., Inc. v. Holum, 544 N.W.2d
148, 154 (N.D. 1996), North Dakota has a lesser interest in applying its peer review privilege to
an entity centered in another state. Indeed, the Court notes that in applying Minnesota’s peer
review privilege law (instead of North Dakota’s) to the discovery dispute, Essentia is not wholly
deprived of the peer review privilege. Rather, Essentia is still entitled to, and protected by,
Minnesota’s peer review privilege. For these reasons, the Court finds that Judge Senechal’s
conclusion that Minnesota’s peer review privilege applies not erroneous or contrary to law.
Additionally, because Minnesota’s (rather than North Dakota’s) privilege law applies, Judge
Senechal’s decision to not vacate the August 2 Order and October 14 Order, both of which address
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the privilege logs in this case, is also not erroneous or contrary to law.6 See Doc. No. 181, pp. 28-
29.
As a final note, the Court questions whether this appeal is premature. The Court recognizes
that Essentia disagrees with decision that Minnesota’s peer review privilege applies and
understands preserving the issue on appeal. Nevertheless, the May 9 Order does not order
disclosure of any documents; rather, it orders an in-camera review to determine whether the
documents Essentia has withheld are, in fact, privileged under Minnesota’s peer review privilege
or under any other asserted privilege. So, to date, no actual disclosure of any withheld documents
has been ordered, and the substantive peer review privilege has yet to be applied to any documents.
And it is entirely possible no documents that have been withheld will be ordered to be produced.
Generally, the Court would prefer to address any ordered disclosure of allegedly privileged
documents (and the applicable peer review privilege statute) in one order and only after allegedly
privileged documents have actually been compelled to be produced.
The Court has considered all other arguments raised by Essentia and addressed them to the
extent it deems necessary. For the reasons articulated above, the Court finds that the May 9 Order
is not erroneous or contrary to law. Accordingly, the Court declines to set aside the May 9 Order.
Certification to the North Dakota Supreme Court
Beyond the appeal, Essentia alternatively argues that the question of which choice-of-law
methodology North Dakota would apply when analyzing conflict of law issues regarding privilege
6 The Court also finds that the factual distinctions between this case and McKibbage, as noted by
Judge Senechal, are highly persuasive. Doc. No. 181, p. 28.
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is a novel issue and that the Court should certify the question to the North Dakota Supreme Court.
See Doc. No. 188, p. 17.
Under North Dakota Rule of Appellate Procedure 47, the North Dakota Supreme Court
may answer certified questions of law “when two conditions are met: (1) the legal question ‘may
be determinative of the proceeding,’ and (2) ‘there is no controlling precedent.’” Blasi v. Bruin
E&P Partners, LLC, 2021 ND 86, ¶ 6, 959 N.W.2d 872; N.D. R. App. P. 47. As explained by the
Eighth Circuit:
Whether a federal court should certify a question to a state court is a matter of
discretion. See Perkins v. Clark Equip. Co., 823 F.2d 207, 209 (8th Cir. 1987). As
the D.C. Circuit has stated: “The most important consideration guiding the exercise
of this discretion ... is whether the reviewing court finds itself genuinely uncertain
about a question of state law....” Tidler v. Eli Lilly & Co., 851 F.2d 418, 426 (D.C.
Cir. 1988). We have expressly held that without a “close” question of state law or
the lack of state sources, a federal court should determine all the issues before it.
Perkins, 823 F.2d at 209.
Johnson v. John Deere Co., a Div. of Deere & Co., 935 F.2d 151, 153-54 (8th Cir. 1991).
Here, the certification question largely turns on whether the present issue—which choice-
of-law methodology North Dakota would apply when analyzing conflict of law issues regarding
privilege—may be determinative of the proceeding. Importantly, an answer either for or against
Essentia would not be determinative of this proceeding. Even assuming arguendo that North
Dakota courts would apply the methodology as argued by Essentia and, under this methodology,
North Dakota’s peer review privilege applied, the next steps of discovery still continue. And again,
as noted above, the May 9 Order does not compel Essentia to disclose anything. Rather, the May
9 Order simply invites the parties to select and submit a certain number of documents to the Court
for in-camera review to determine whether Minnesota’s peer review privilege even applies.
Accordingly, whether Essentia is successful on its appeal or not, discovery continues, the
underlying case continues, and the certification would not materially advance the ultimate
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termination of the litigation. Accordingly, the Court declines to exercise its discretion to certify a
question to the North Dakota Supreme Court under the facts and circumstances presented in this
case. Essentia’s motion for certification is, thus, denied.
IV. 	CONCLUSION
The Court has carefully reviewed the May 9 Order, the briefs, the applicable law, and the
entire record. The Court finds that the May 9 Order is not erroneous or contrary to law.
Accordingly, Essentia’s appeal (Docs. No. 188, 190) is DENIED.
IT IS SO ORDERED.
Dated this 8th day of July, 2022.
/s/ Peter D. Welte
Peter D. Welte, Chief Judge
United States District Court
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