United States' Brief in Support of its Motion for Entry of its Proposed ProtectiveOrder

Date: 
Thursday, March 18, 1999
Document Type: 
Protective Motions, Memoranda, and Orders

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

  ______________________________________
    )  
  UNITED STATES OF AMERICA, )    
    )    
                      Plaintiff, ) Civil Action No. 99-005(MMS)
    )    
            vs. )    
    )    
  DENTSPLY INTERNATIONAL, INC., )    
    )    
                      Defendant. )    
  ______________________________________ )  

        UNITED STATES' BRIEF IN SUPPORT OF ITS MOTION
        FOR ENTRY OF ITS PROPOSED PROTECTIVE ORDER
          AND IN RESPONSE TO THE MOTION OF
        HENRY SCHEIN
, INC. TO INTERVENE FOR THE
          SOLE PURPOSE OF SECURING ENTRY OF
                A PROTECTIVE ORDER

 

Dated: March 18, 1999
 

COUNSEL FOR PLAINTIFF
UNITED STATES OF AMERICA
 

CARL SCHNEE
UNITED STATES ATTORNEY
 

Judith M. Kinney (DSB #3643)
Assistant United States Attorney
1201 Market Street, Suite 1100
Wilmington, DE 19801
(302) 573-6277
 

Mark J. Botti
William E. Berlin
Michael S. Spector
Michael D. Farber
United States Department of Justice
Antitrust Division
325 Seventh Street, N.W., Suite 400
Washington, DC 20530
                       TABLE OF CONTENTS
 

                                                Page
 

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 

TABLE OF AUTHORITIES.................................................................................................ii
 

I.  STATEMENT OF THE NATURE AND STAGE OF THE PROCEEDING........1
 

II.   SUMMARY OF ARGUMENT.................................................................................3
 

III.  STATEMENT OF FACTS........................................................................................6
 

IV.  ARGUMENT........................................................................................... .............. ....7
 

A.         Economic Injury Is Likely to Result from Dentsply's In-House
        Business Counsel's Review of Nonparties' Confidential Information.........9
 

   B.  Denial of Access to Dentsply's In-House Counsel Will Facilitate the
        Full Disclosure of Relevant Information by Nonparties.............................13
 

B.         Nondisclosure to Defendant's In-House Counsel Will Have No
        Effect on Defendant's Ability to Defend This Case...................................15
 

C.         The Goals of Protecting Against Economic Injury and of Facilitating
        Discovery Could Also Be Served By the Restrictions on Defendant's
        Outside Counsel Similar to Those That Henry Schein Has Proposed.......17
 

CONCLUSION................................................................................................................... .19
 

 

 

 

 

 

 

 

 

 

 

 

 


Page ii.      

                TABLE OF AUTHORITIES
 

                                                Page
Cases:
 

Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance Co., 784 F.2d 1325
   (7th Cir. 1986)....................................................................................................10,17
 

Boehringer Ingenlhieim Pharmaceuticals, Inc. v. Hercon Labs, Corp.,
   1990 WL 160666 (D. Del. 1990)......................................................................13,18
 

Carpenter Tech. Corp. v. Armco, Inc., 132 F.R.D. 24 (E.D. Pa. 1990).........................13
 

Cipollone v. Liggett Group, Inc., 785 F.2d 1108 (3d Cir. 1986).......................................8
 

In re Coordinated Pretrial Proceeding in Petroleum Products Antitrust Litigation,
   906 F.2d 432 (9th Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
 

Greater Rockford Energy and Technology Corp v. Shell Oil Co., 138 F.R.D. 530
   (C.D. Ill. 1991)........................................................................................................14
 

Leucadia, Inc. v. Applied Extrusion Technologies, 998 F.2d 157 (3d Cir. 1993).............7
 

Pansy v. Borough of Stroudsburg, 23 F.3d 772 (3d Cir. 1994).......................................2,8
 

Phillips Petroleum Co. v. Rexene Products Co, 158 F.R.D. 43 (D. Del. 1994). . . . . 12
Safe Flight Instrument Corp. v. Sundstrand Data Control, Inc., 682 F. Supp. 20
   (D. Del. 1988)............................................................................................8,11,12,15

 

Standard Chlorine of Delaware, Inc. v. Sinibaldi, 821 F. Supp. 232 (D. Del. 1992)........8
 

United States v. Citicorp, CA No. 98-436JJF (D. Del. Oct. 21, 1998)............................17
 

United States v. International Business Machines, Corp., 72 Civ. 344
   (S.D.N.Y. April 10, 1996) .......................................................................................8

 

United States v. International Business Machines, Corp., 62 F.R.D. 526
   (S.D.N.Y. 1974)...............................................................................................passim

 

United States v. Lockheed Martin, 1998 WL 306755 (D.D.C. May 29, 1998)...............16
 

 

                                                      

 

United States v. Long Island Jewish Medical Center, CV 97-3412
   (E.D.N.Y. July 18, 1997).......................................................................................17

United States v. Visa, U.S.A., Inc., 98 Civ. 7076 (BSJ)
   (S.D.N.Y. Dec. 11, 1998)......................................................................................17

United States v. United States Gypsum Co., 422 U.S. 422 (1978) . . . . . . . . . . . . . 9
 

United States Steel Corp. v. United States, 730 F.2d 1465 (Fed. Cir. 1984)...................13
 

 

Statutes and Rules:
 

Clayton Act, § 3 .................................................................................................................. 1
 

D. Del. LR 26.2........................................................................................................... 2,3,14
 

Federal Rules of Civil Procedure:
   Rule 24(b)...................................................................................................................2
   Rule 26(c)(7)...........................................................................................................7,8

 

Sherman Act, §§ 1-2............................................................................................................. 1

.


Page 1...      

 

I.  STATEMENT OF THE NATURE AND STAGE OF THE PROCEEDING
   On January 5, 1999, the United States filed its complaint (D.I. 1) against
Defendant, Dentsply International, Inc., seeking equitable and other relief for
Defendant's continuing violations of Section 2 of the Sherman Act, Section 3 of the
Clayton Act and Section 1 of the Sherman Act. The Complaint alleges that Defendant
has engaged, and continues to engage, in a variety of actions that unlawfully maintain its
monopoly power and deny competing manufacturers of artificial teeth access to
independent distributors. On February 11, 1999, Defendant filed an amended answer
(D.I. 11).
   In February 1999, the United States and Defendant discussed a proposed
stipulated protective order that was based on previous protective orders to which the
Antitrust Division and other defendants have stipulated. The proposed stipulated
protective order would have established protection for highly confidential information,
that is, information, that, if disclosed, would result in a clearly defined and serious
injury. On February 11, 1999, Defendant returned a redlined version of the proposed
stipulated protective order. Ultimately, after a number of discussions and revisions,
Defendant identified only one issue that divided the parties: Defendant demanded the
right to disclose nonparty confidential information to an in-house business attorney, Mr.
Brian Addison, who is Defendant's Vice President, Secretary and General Counsel.
   Orally and by letter dated March 3, 1999, the United States offered to stipulate to
the majority of the terms of a protective order but allowing each party to reserve the


Page 2...      

right to litigate the issue of in-house counsel's access to confidential information, or any
other issue on which the parties could not reach agreement.1 Defendant refused this
proposal.
   On March 4, 1999, after discussions with both parties, Henry Schein, Inc., a
nonparty interested in preserving the confidentiality of certain of its information, filed its
Motion to Intervene for the Sole Purpose of Securing Entry of a Protective Order
("Motion to Intervene") (D.I. 19) and a Memorandum of Law in Support of the Motion
(D.I. 20).2 The protective order proposed by Henry Schein ("Schein Protective Order")
mirrors in nearly all material respects the protective order now proposed by the United
States. The Schein Protective Order, however, includes a limitation on the future
representation of Defendant by outside counsel who receive access to nonparty
confidential information. That additional protection creates a potential conflict between
the protection that Henry Schein seeks for its confidential information and the interim
protection afforded by D. Del. LR 26.2.
   On March 5, 1999, Defendant delivered to the Court a letter stating its opposition
to Henry Schein's Motion to Intervene and the provisions in the Schein Protective Order
that would impose limitations on outside counsel. Defendant argued, among other


Page 3..      

things, that there "is no authority supporting" the relief requested by Henry Schein and
that there was no factual basis for the relief because "Dentsply's outside counsel does not
advise Dentsply on competitive business decisions."
   At the status conference on March 8, 1999, the Court established the terms under
which the United States could produce documents to Defendant pursuant to D. Del. LR
26.2 during the pendency of Henry Schein's Motion. Accordingly, on March 9, 1999,
the United States produced to Defendant, pursuant to D. Del. LR 26.2, documents
produced by nonparties to this matter that might contain confidential information.
   The United States now moves for entry of its proposed protective order ("the
United States' Protective Order") and files this brief in support of that Motion and in
response to the Motion of Henry Schein. The United States' Protective Order is, in most
respects, identical to the last version of a protective order that was sent to Defendant, as
to which Defendant objected on the ground just described.3 This Brief sets forth the
arguments for not permitting disclosure to Defendant's inside, business counsel and
discusses non-party Henry Schein's proposal to limit the future representation of


Page 4      

Defendant by Defendant's outside counsel in this action.
II.   SUMMARY OF ARGUMENT
   The United States' Protective Order appropriately limits pretrial disclosure of
information that a producing party or nonparty to this case designates as confidential,
that is, information which, if disclosed, "would result in a clearly defined and serious
injury." It affords Defendant's outside counsel, counsel for the United States, and
testifying and consulting experts full access to confidential information and establishes a
procedure for disclosure of confidential information to potential and actual trial
witnesses. Nonparty discovery in this matter, as has discovery in other civil antitrust
enforcement actions, will likely involve the most sensitive business information of
Defendant's competitors and customers.
   Disclosure of such information to Defendant will, by definition and by necessity,
cause economic harm. Defendant would gain an unfair advantage over its competitors
and customers through access to this information. Moreover, allowing Defendant's in-
house business counsel to have access to confidential information will likely cause the
very harm to nonparties that a protective order is intended to prevent. The United States
is not questioning the good faith of Defendant's in-house counsel. Rather, the concern
arises from the risk "of inadvertant disclosure. House counsel are employed full-time to
advance the interests of their employer. They regularly meet with personnel of the
corporation on day-to-day matters, wholly apart from this litigation." United States v.
International Business Machines, Corp.
, 72 Civ. 344, 3 (S.D.N.Y. April 10, 1996)
("IBM") (Appendix A-3-24), quoting, SCM v. Xerox Corp., Civil No. 15,807 (D.


Page 5      

Conn. May 25, 1977) , aff'd sub nom, In re Xerox Corp., 573 F.2d 1300 (2d Cir.
1977).
   Allowing Defendant's in-house business counsel to have access to the confidential
information of nonparties is likely to impede discovery and the preparation of this action
for trial. Knowledge that Defendant's in-house business counsel will have access to their
confidential information will chill nonparties' cooperation during discovery.4 Similar
concerns warrant closely guarding the confidential information obtained by the United
States during its civil investigation. The disclosure of such information to a defendant's
employees, including business counsel such as in this matter, will chill nonparties'
cooperation with the United States during investigations of potential antitrust violations.
   Withholding from Defendant the narrow category of highly confidential
information subject to the Protective Order will not impair Defendant's ability to defend
this suit. This type of protective order has routinely been stipulated to by defendants in
antitrust cases brought by the United States and has been entered by courts hearing such
cases. Under the United States' Protective Order, Dentsply's in-house counsel will have
access to a wide range of documents and information that should allow inside counsel to
make informed decisions about, and assist in, the defense of this action.
   Finally, the United States does not object to the Court's inclusion of additional
protection similar to what Henry Schein is seeking in the form of limitations on


Page 6.      

Dentsply's outside counsel. With some modification, the Court may be able to provide
this type of additional protection to nonparties' confidential information without
impinging on any significant interest of Defendant.
III.  STATEMENT OF FACTS
   The United States anticipates seeking additional information in discovery from
various nonparties that likely will include confidential information, that is, information
that, if disclosed, would result in a "clearly defined and serious injury." Some of those
nonparties, but far less than the majority of them, have already provided testimony and
documents to the United States during its investigation that probably contain confidential
information. These nonparties, both those who have produced and those who are likely
to produce information, include competitors of Defendant, potential competitors of
Defendant, distributors of dental products, and others.5
   Information designated as confidential by these nonparties will likely include
sensitive business information such as sales and marketing plans, strategic plans,
financial forecasts and margin information, customer information, pricing information,
and information relating to nonparties' agreements with other entities in various
industries related to dental products and dentures. The Affidavit of Norman Weinstock,
the President of Henry Schein's dental laboratory dealer subsidiary, describes such


Page 7...      

highly confidential information and how "[a]llowing access to these confidential
materials would give Dentsply an unfair advantage in future business dealings with
Henry Schein." Affidavit of Norman Weinstock in Support of Henry Schein's Motion to
Intervene for the Sole Purpose of Entry of Protective Order ("Weinstock Affidavit")
(D.I. 22) at ¶ 14. For example, Weinstock's Affidavit identifies "highly confidential and
proprietary information" such as its customer contacts, including its customer lists, and
explains the harm disclosure of such information would cause:
   In the artificial tooth area, dissemination of Henry Schein's customer information
   also would prove detrimental. The artificial tooth business is one in which
   maintaining customer relationships takes substantial effort and investment; Henry
   Schein worked hard to develop a list of clientele and contacts at many dental
   laboratories and with various dental practices. While Dentsply may have a partial
   picture of Henry Schein's customer base and contacts, providing unlimited
   customer information to Dentsply would enable it to go directly to many
   customers and obtain more comprehensive margin information, for example,
   which could be used by Dentsply in subsequent negotiations with Henry Schein.

 

Id. at ¶ 17. Weinstock's Affidavit provides other examples, as well, of the types of
harm that are likely to result from disclosure to Defendant. During the investigation of
this matter, the United States obtained information similar to that described in
Weinstock's Affidavit from Dentsply's competitors and from other dealers of artificial
teeth.
IV.  ARGUMENT
   "Under Fed. R. Civ. P. 26(c)(7), the district court, for good cause shown, may
grant a protective order requiring that 疎 trade secret or other confidential . . .
commercial information not be disclosed or be disclosed only in a designated way.' "
Leucadia, Inc. v. Applied Extrusion Technologies, 998 F.2d 157, 166 (3d Cir. 1993).


Page 8......      

" 繕mbrella' protective orders, carefully drafted to suit the circumstances of the case,
greatly expedite the flow of discovery material while affording protection against
unwarranted disclosures." Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1123 n.19
(3d Cir. 1986) (citation omitted), cert.denied, 484 U.S. 976 (1987); accord, Standard
Chlorine of Delaware, Inc. v. Sinibaldi
, 821 F. Supp. 232, 256 (D. Del. 1992).
   Under the terms of the United States' Protective Order, and as defined by the
Third Circuit Court of Appeals, "confidential information" is defined as "any trade
secret or other confidential research, development, or commercial information, as such
terms are used in Fed. R. Civ. P. 26(c)(7), produced by or in the possession of any
protected person . . . , the disclosure, or further disclosure, of which would result in a
clearly defined and serious injury
." Protective Order ¶ 1(a) (emphasis supplied); see
Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d Cir. 1994).
   Discovery in antitrust cases filed by the United States is often extensive, primarily
because the United States, in bringing and litigating an antitrust action, must collect and
analyze a large amount of "economic data and other information." United States v.
International Business Machines Corp.
, 62 F.R.D. 526, 528-29 (S.D.N.Y. 1974). The
United States, in this and other antitrust actions, undertakes discovery not as a private
litigant, but as a litigant suing "on behalf of all the people." Id. at 528-29. In this
action, like in other antitrust enforcement actions, the United States and Defendant will
seek information, including confidential information, from a wide range of nonparties.
   In determining the extent to which confidential information will be disclosed in
litigation, this Court must balance the competing goals of "full disclosure of relevant


Page 9.      

information and reasonable protection against economic injury." Safe Flight Instrument
Corp. v. Sundstrand Data Control, Inc.
, 682 F. Supp. 20, 23 (D. Del. 1988). Here, the
twin goals of protecting against economic injury and assuring full disclosure of relevant
information are best achieved by a protective order that strictly protects nonparties'
confidential information.
   A.  Economic Injury Is Likely to Result from Dentsply's In-House
        Business Counsel's Review of Nonparties' Confidential Information

 

   By definition, disclosure of information designated "confidential" in this matter
"would result in a clearly defined and serious injury." United States' Protective Order
¶ 1(a). As to the confidential information of nonparties that compete with Defendant,
disclosure of their confidential information is likely to cause economic injury in two
ways. First, disclosure to Defendant will undermine fair competition between Defendant
and its competitors. This would be an ironic result in an action wherein the United
States has alleged that the Defendant has acted to maintain its monopoly power by
denying these same competitors access to independent distributors. Nonparties should
be entitled "to a great degree of protection where their confidential information will be
disclosed to a direct competitor." IBM at 3, quotingUnited States v. CBS, Inc., 103
F.R.D. 365, 368 (C.D. Cal. 1984); Carpenter Technology v. Armco, Inc., 132 F.R.D.
24, 26 (E.D. Pa. 1990) (noting the irreparable harm that can be suffered when a party is
forced to disclose confidential information to a competitor). Second, the disclosure of
confidential information among competitors, such as current and projected price
information, can itself give rise to anticompetitive results that harm consumers. See,


Page 10.      

e.g., United States v. United States Gypsum Co., 438 U.S. 422, 457 (1978) ("most
likely consequence of any such agreement to exchange price information would be the
stabilization of industry prices"); In re Coordinated Pretrial Proceeding in Petroleum
Products Antitrust Litigation
, 906 F.2d 432, 448 (9th Cir. 1990) (competitors'
dissemination of pricing information "served little purpose other than to facilitate
interdependent or collusive price coordination"), cert.denied, 500 U.S. 959 (1991) .
   For those nonparties that are customers, rather than competitors, of Defendant,
such as Henry Schein in parts of its business, disclosure of their confidential information
is also likely to give rise to economic harm. Norman Weinstock's Affidavit describes
how such information could be used by Defendant to the economic loss of such
nonparties.6 Because of such concerns, the Seventh Circuit Court of Appeals in Ball
Memorial Hosp., Inc. v. Mutual Hospital Insurance Co.
, 784 F.2d 1325 (7th Cir. 1986),
affirmed the entry of a protective order restricting the plaintiff hospitals' access to their
customer's, a health insurance company's, confidential price data. Id. at 1345-46. The
court recognized that the plaintiff could "use [the price data] to advantage in the next
round of negotiations." Id. at 1346.
   Allowing disclosure of nonparties' confidential information to Dentsply's in-
house business counsel would permit these harms to occur. Like many companies' in-


Page 11.      

house counsel, Defendant's in-house counsel's duties are unavoidably intertwined with
the day-to-day business operations of the company. Recognizing this fact, one court
recently refused to allow an antitrust defendant's in-house litigation counsel access to
third parties' confidential information.IBM at 2-3. As employees, "in-house counsel
stand in a unique relationship to the corporation in which they are employed. Although
in-house counsel serve as legal advocates and advisors for their client, their continuing
employment often intimately involves them in the management and operations of the
corporation of which they are part." IBM at 3, quotingF.T.C. v. Exxon Corp., 636
F.2d 1336, 1350 (D.C. Cir. 1980).
   Recognizing the risk that an in-house counsel's access to nonparties' confidential
information will result in economic harm to third parties does not necessarily assume that
an in-house counsel will act in bad faith in contravention of a protective order. Rather,
"[t]he issue concerns not good faith but risk of inadvertent disclosure. House counsel
are employed full-time to advance the interests of their employer. They regularly meet
with personnel of the corporation on day-to-day matters, wholly apart from this
litigation."
IBM at 3, quoting, SCM v. Xerox Corp., Civil No. 15,807 (D. Conn. May 25, 1977),
aff'd sub nom, In re Xerox Corp., 573 F.2d 1300 (2d Cir. 1977).
   The risk of inadvertent disclosure is even more acute where, as here, the in-house
counsel is not segregated from business matters, such as where the in-house counsel has
responsibility only for litigation matters. Indeed, here, Dentsply's counsel is not only a
business attorney but also is an officer of the company. This Court has recognized that


Page 12.      

an officer of a company may have difficulty compartmentalizing information learned in
litigation from use in future decision making on behalf of the company. In Safe Flight,
this Court denied plaintiff corporation's president access to defendant's confidential
information, reasoning that "accepting that [the president] is a man of great moral fiber,
we nonetheless question his human ability during future years of research to separate the
applications he has extrapolated from [defendant's] documents from those he develops
from his own ideas." 682 F. Supp. at 22; seealsoPhillips Petroleum Co. v. Rexene
Products Co
, 158 F.R.D. 43, 46 (D. Del. 1994) ("The clear concern in Safe Flight was
the potential for the unconscious, but improper use of technical information by a party in
the future, in spite of any protective order.").
   In this case, Defendant's in-house business counsel similarly will not be able to
disregard confidential information learned in this action in his future involvement in
Defendant's day-to-day operations. If Defendant's in-house counsel, who, in the course
of performing his ordinary business duties reviews actual or potential agreements and
other programs, policies and practices relating to distributors, has access to these
distributors' confidential information -- including such things as the distributors' strategic
plans and pricing and margin information, then those distributors will inevitably be
disadvantaged in their future negotiations and other dealings with Defendant.
   Undoubtedly, Defendant will point to cases that have allowed in-house counsel
access to confidential information. Those cases, however, have permitted that access in
circumstances significantly different from those presented by this matter. For example,
in Safe Flight, this Court allowed defendant's in-house counsel access to plaintiff's


Page 13....      

confidential information. The plaintiff represented to the Court that its in-house counsel
was not involved in its business affairs in such a way as to give rise to intentional or
inadvertant disclosure of the confidential information. Id. The Court thus observed that
"[t]hese attorneys simply do not face [the company president's] prospect of having to
distill one's own thoughts from a competitor's thoughts during the course of future
aeronautic work." See alsoBoehringer Ingenlhieim Pharmaceuticals, Inc. v. Hercon
Labs, Corp.
, 1990 WL 160666, at *1-2 (D. Del. 1990) (Appendix A-25-27) (In-house
counsel were each in a position to "exclude himself or herself from conflicting work"
which "avoid[ed] the possibility of conscious or unconscious abuse of confidential
information."); United States Steel Corp. v. United States, 730 F.2d 1465, 1468 (Fed.
Cir. 1984) (court must inquire whether the in-house counsel is involved in the company's
"competitive decisionmaking"); Carpenter Tech. Corp. v. Armco, Inc., 132 F.R.D. 24,
27 (E.D. Pa. 1990) (same). In this case, Defendant has not, and indeed cannot, declare
that its in-house business counsel will not be involved in the day-to-day operations of the
company and consequently will not be in a position to consciously or unconsciously
misuse confidential information learned in this litigation.
B.         Denial of Access to Defendant's In-House Counsel Will Facilitate the
        Full Disclosure of Relevant Information by Nonparties

 

   The concerns that have led the courts to deny confidential information to in-house
counsel will chill the willingness of nonparties to cooperate during discovery of this
action and in future antitrust investigations. As the Henry Schein Motion demonstrates,
nonparties are likely to recognize and share the concern that Defendant's in-house,


Page 14..      

business counsel will make use of their confidential information to the nonparties'
disadvantage. Indeed, a number of nonparties have expressed such a concern orally to
counsel for the United States.
   As such, there is a substantial risk that review by Defendant's in-house, business
counsel of nonparties' confidential information will impede discovery in this action. A
nonparty concerned about such access may refuse to produce information and apply for
additional protection from this Court or for a protective order from the court in the
jurisdiction in which it is located. SeeIBM at 4. Nonparties who have not intervened
will not be precluded by the Court's decision here from seeking additional protection at a
later time. Greater Rockford Energy and Technology Corp. v. Shell Oil Co., 138
F.R.D. 530, 536-37 (C.D. Ill. 1991). Denying Defendant's in-house counsel access to
nonparties' confidential information will reduce the likelihood of peripheral discovery
litigation and thus will expedite discovery in this case.7


Page 15..      

   Similarly, many companies not being investigated themselves produce
confidential information to the United States over the course of an antitrust investigation
with the expectation that the information will not fall into the hands of a competitor,
purchaser, supplier, or other entity that would be in a position to misuse the information.
Indeed, a number of nonparties in this action have done just that over the course of the United States' investigation of Defendant.
   Allowing Defendant's in-house, business counsel to have access to confidential
information produced by nonparties in this action would create a very real risk that, in
future antitrust investigations, companies will be more reluctant to produce confidential
information because of a fear that the information would be divulged in litigation. See
Safe Flight, 682 F. Supp. at 23 (stating that "the International Trade Commission is
especially conservative regarding the divulgence of confidential materials because it 訴s
heavily dependent on the voluntary submission of confidential information' by parties")
(citations omitted).
   C.  Nondisclosure to Defendant's In-House Counsel Will Have No Effect
        on Defendant's Ability to Defend This Case

 

   At the hearing on March 8, 1999, Defendant argued that its in-house, business
counsel needed to review nonparties' confidential information in order to defend itself in
this action. Under the United States' proposed Protective Order, however, Defendant's
in-house counsel will have ample access to the information necessary to strategize and


Page 16.      

otherwise assist outside counsel; he just will not be able to review the confidential
information of Defendant's competitors and other nonparties. It bears emphasis that
information designated as "confidential" under the proposed order must be so designated
by a good faith representation to this Court by nonparties that disclosure of the
designated information "would result in a clearly defined and serious injury."
Designations under this definition will likely protect from disclosure only a small
percentage of the overall amount of information produced by nonparties. Defendant's in-
house counsel would be free to review all other information produced by nonparties in
order to assist in the preparation of Dentsply's defense.
   Moreover, under the United States' Protective Order, Defendant's outside
counsel, who has represented Defendant in this and related matters for a number of
years, would have access to all of the information designated as confidential. Outside
counsel will be able to utilize its extensive experience in handling Defendant's antitrust
litigation in the dental products industries, which should eliminate any possible need for
Defendant's in-house counsel to review the confidential information of nonparties.
IBM at 4. Finally, Defendant has provided no support for its assertion that its in-house,
business counsel must have access to nonparties' highly confidential information in order
to defend this case. In fact, in the United States' experience in recent civil antitrust
enforcement actions, defendants do not need access to highly confidential information in
order to defend themselves. Perhaps recognizing the reasonableness of restricting their
in-house counsel's access to nonparty confidential information, recent antitrust
defendants in litigation with the United States have stipulated to protective orders that


Page 17.....      

allow nonparties to protect their highly confidential information from disclosure to
defendants' personnel, including in-house counsel. SeeUnited States v. Lockheed
Martin
, 1998 WL 306755 (D.D.C. May 29, 1998) (Appendix A-28-35); United States v.
Citicorp
, CA No. 98-436JJF, (D. Del. Oct. 21, 1998) (Appendix A-36-49); United
States v. Long Island Jewish Medical Center
, CV 97-3412 (E.D.N.Y. July 18, 1997)
(Appendix A-50-58); United States v. Visa, U.S.A., Inc., 98 Civ. 7076 (BSJ) (S.D.N.Y.
Dec. 11, 1998) (Appendix A-59-72).
   D.  The Goals of Protecting Against Economic Injury and Facilitating
        Discovery Could Also Be Served By Restrictions on Defendant's
        Outside Counsel Similar to Those That Henry Schein Has Proposed

 

   The protective order proposed by Henry Schein allows Defendant's outside
counsel and employees of such outside counsel to have access to confidential information
provided that these attorneys "have not been, are not, and for the earlier of four (4) years
from the date of this order or two (2) years from the conclusion of trial in this action,
will not be, without prior approval of the Court, involved in any other matters on behalf
of defendant relating to its competitors, distributors, or customers, with the exception of
matters related to this action." Schein Protective Order at ¶ 10. The Order allows
access to "outside counsel working as an attorney for the Department of Justice in
connection with this action and employees of such outside counsel" subject to a similar
restriction. Id.
   The United States' proposed Protective Order does not include a similar
provision, in part, because Henry Schein's proposal might force a choice on Dentsply to
replace counsel on this matter or on some other pending matters. Forcing withdrawal


Page 18.      

from this action or some other action may implicate significant interests of this Court, the
other courts in which those matters are pending, and Defendant. On the other hand,
contrary to Dentsply's claim that "no authority" supports such a provision, at least one
court has entered a similar order. SeeBall Memorial Hosp., 784 F.2d at 1345 (affirming
entry of an order that restricted disclosure to "trial counsel to this lawsuit who are
engaged in the preparation for trial . . . and who have neither represented nor [will]
represent for 18 months any hospital, the Indiana Hospital Association, or any other
entity in connection with [defendant] on any matter other than the trial of the case."); see
alsoBoehringer, 1990 WL 160666, at *1, quotingU.S. Steel Corp. v. United States, 730
F.2d 1465, 1468 (Fed. Cir. 1984) ("[T]he factual circumstances surrounding each
individual counsel's activities, association, and relationship with a party, whether counsel
be in-house or retained, must govern any concern for inadvertent or accidental
disclosure.").
   Such a provision would appear to be most appropriate where there is a danger of
inadvertant disclosure, such as where outside counsel provides legal advice on
nonlitigation matters to Defendant. According to Defendant, however, that particular
risk of disclosure is not presented in this matter because, as stated in Defendant's March
5, 1999 letter to the Court, its outside counsel "does not advise Dentsply on competitive
business decisions." Accordingly, inclusion of language in a protective order that
restricts Defendant's outside counsel who has access to confidential information from
providing legal advice on nonlitigation matters, including counseling on negotiations, to
Defendant for the period of time in Henry Schein's order could advance the legitimate
purposes of the Protective Order without impairing any substantial interest of Defendant.

 

 

V.   CONCLUSION
   For the reasons stated above, the United States respectfully requests that the
Court grant its motion and enter the proposed Protective Order.

 

                          Respectfully submitted,

                           ____________/s/____________
                          COUNSEL FOR PLAINTIFF
                          UNITED STATES OF AMERICA

 

                          CARL SCHNEE
                          UNITED STATES ATTORNEY

 

                           ____________/s/____________
                          Judith M. Kinney (DSB #3643)
                          Assistant United States Attorney
                          1201 Market Street, Suite 1100
                          Wilmington, DE 19801
                          (302) 573-6277

                           ____________/s/____________
                          Mark J. Botti
                          William E. Berlin
                          Michael S. Spector
                          Michael D. Farber
                          United States Department of Justice
                          Antitrust Division
                          325 Seventh Street, N.W., Suite 400
                          Washington, DC 20530
                          (202) 307-0827

 


FOOTNOTES

 

1 Letter from Michael S. Spector (counsel for Plaintiff) to Kelly A. Clement (counsel for Defendant) (March 3, 1999) (Appendix A-1-2).

2 The United States supports Henry Schein's right to intervene for the sole purpose of securing entry of a protective order. Permissive intervention is appropriately used for this purpose under Rule 24(b) of the Federal Rules of Civil Procedure. See Pansy v. Borough of Stroudsburg, 23 F.3d 772, 778 (3d Cir. 1994).

3 The United States' Protective Order varies from the proposed protective order last sent to Defendant in only three significant ways. First, as directed by the Court at the March 8, 1999 conference, the United States' Protective Order does not restrict the use of information at trial. Second, the Order does not cover information produced by Defendant prior to this action. Third, the Order permits the United States to disclose confidential information in legal proceedings to which it is a party and for law enforcement purposes, (¶ 13). The United States' proposed Protective Order also adds various procedural protections that are included in the Henry Schein Protective Order but were not included in the last proposal sent to Defendant. The United States has modified those additional procedures to protect the United States' ability to use confidential information pursuant to paragraph 13 of the proposed Protective Order.

4 The vast majority, if not all, of those nonparties reside outside of the District of Delaware, and the parties will have to seek their confidential business information and other material through subpoenas issued from other federal district courts under Rule 45. Additionally, the parties may seek international discovery from non-parties.

5 Nonparties who did not produce documents or provide testimony during the investigation have had no notice of the proceedings related to the proposed Protective Order. The United States is giving notice of these proceedings to those parties that provided documents or testimony during the investigation by serving them with copies of this brief, Henry Schein's Motion and related papers, and Dentsply's March 5, 1999 correspondence to the Court.

6 See Weinstock Affidavit, at ¶15 ("Henry Schein would not provide its confidential information to any party with which it negotiates, because it would reveal sensitive information such as (a) the extent to which Henry Schein may rely on Dentsply products in a particular area, (b) the price parameters established by Henry Schein, and (c) Henry Schein's mark up of Dentsply's products, all of which would negate Henry Schein's ability to negotiate favorable programs and agreements.").

7 Procedurally, some nonparties could move for additional protection pursuant to ¶ 3(b-c) of the United States' proposed Protective Order. That paragraph provides that non-party information produced during the investigation to the United States shall be treated as confidential for twenty days following notice of the terms of a protective order entered by the Court and shall not be disseminated beyond the dissemination allowed for by D. Del. LR 26.2 for thirty days following such notice. These time periods will allow the non-parties to designate their confidential information, and, if they have concerns about the protective order, to seek additional protection from the Court. The United States will undertake to provide prompt notice to these non-parties upon entry of the United States' Protective Order or of a protective order containing a similar provision. This procedural device does not apply to future nonparty discovery, which is likely to generate the majority of confidential information. Rather, nonparties for future discovery will have the opportunity to designate their confidential information at the time subpoenas are served by the parties to this action and to seek then additional protections before their confidential information is disclosed to Defendant. Accordingly, the potential review by Defendant's in-house counsel of nonparties' confidential information could generate a series of separate discovery disputes.

Updated August 18, 2015