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               UNITED STATES DISTRICT COURT
               FOR THE DISTRICT OF DELAWARE

______________________________________
)  
)  
UNITED STATES OF AMERICA, ) CA 98-475 JJF
)  
                    Plaintiff, )  
)  
          vs. )  
)
FEDERATION OF PHYSICIANS AND )
DENTISTS, INC., )
)
                    Defendant. )
)
______________________________________)


     PLAINTIFF'S REPLY TO DEFENDANT'S ANSWERING BRIEF
         IN OPPOSITION TO PLAINTIFF'S MOTION FOR
         ENTRY OF ITS PROPOSED PROTECTIVE ORDER



Dated: January 22, 1999

COUNSEL FOR PLAINTIFF
UNITED STATES OF AMERICA

RICHARD G. ANDREWS
UNITED STATES ATTORNEY

          By: Virginia Gibson-Mason (DSB # 3699)         
Assistant United States Attorney
1201 Market Street, Suite 1100
Wilmington, DE 19801
Tel.: (302)573-6277

Melvin A. Schwarz
Special Counsel for Enforcement
U.S. Department of Justice
Antitrust Division
601 D Street, N.W.
Washington, D.C. 20530
Tel.: (202) 305-1210
Steven Kramer
Richard S. Martin
Denise E. Biehn
Michael D. Farber
Heather H. Howard,
Attorneys
U.S. Department of Justice
Antitrust Division
325 Seventh Street, N.W.
Washington, D.C. 20530
Tel.: (202) 307-0997


Page i.      

                   TABLE OF CONTENTS


TABLE OF CONTENTS.............................................................................................................I

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

I.  ARGUMENT........................................................................................................ . .........1

   A. Plaintiff's Proposed Umbrella Protective Order Appropriately Seeks to
      Protect Confidential Information Produced by Parties and Non-Parties...................1

   B. The United States' Proposed Protective Order Does Not Hamper the
      Federation's Ability to Prepare its Defense..............................................................4


II.   CONCLUSION..................................................................................................... .. ........7




Page ii 

                TABLE OF AUTHORITIES

Cases

Ball Memorial Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325 (7th Cir. 1986).............3,4

Cipollone v. Liggett Group, Inc., 785 F.2d 1108 (3d Cir. 1985)................................................6

Coca-Cola Bottling Co. v. Coca-Cola Co., 107 F.R.D. 288 (D. Del. 1985)...............................4

Phillips Petroleum Co. v. Rexene Products, Co., 158 F.R.D. 43 (D. Del. 1994)........................4

Safe Flight Instrument Corp. v. Sundstrand Data Control, Inc., 682 F. Supp. 20
(D. Del. 1988).............................................................................................................................4

Scovill Mfg. Co. v. Sunbeam Corp., 61 F.R.D. 598 (D. Del. 1973)...........................................5

Standard Chlorine of Delaware, Inc. v. Sinibaldi, 821 F. Supp. (D. Del. 1992).........................6


Page 1      


.I.  ARGUMENT

   The United States submits this Reply to Defendant Federation of Physicians and
Dentists' ("the Federation's") Answering Brief in Opposition to Plaintiff's Proposed
Protective Order (Defendant's Answering Brief) (D.I. 38). For the reasons set forth below, as
well as in the United States' Opening Brief (D.I. 36), this Court should enter plaintiff's
proposed protective order and reject defendant's proposed provision that would allow its
employees full access to confidential business information produced by non-parties in this
action.

A.         Plaintiff's Proposed Umbrella Protective Order Appropriately Seeks to
        Protect Confidential Information Produced by Parties and Non- Parties


   The central premise of Defendant's Answering Brief -- that the United States has
proposed a protective order without defendant's "full access" provision to "gain an unfair
tactical advantage" (Defendant's Answering Brief at 2) -- is totally misplaced. The United
States seeks to limit the disclosure of confidential business information that has been or will
be produced by non-party health care insurers and physician groups to accommodate
legitimate concerns that have been raised by these non-parties. Several non-parties, including
current and former members of the Federation and health care insurers doing business in
Delaware, have voiced persuasive objections to allowing Federation representatives full
access to their respective confidential business information. The proposed protective order
accommodates these concerns while allowing the Federation and its lawyers the ability to
conduct full discovery and prepare for trial.


Page 2      

   The defendant argues that it should have "full access" to the confidential information
because the Federation "is not currently functioning and has not recently been asked to
function as a third party messenger in Delaware." Defendant's Answering Br. at 15; Seddon
Dec. at ¶ 9. This argument fails for three reasons. First, there is no assurance that the
Federation will not revert to serving as a "negotiating agent" for competing Delaware
orthopedic surgeons in the near future.1 Second, while not currently functioning as a "third-
party messenger" in Delaware, the Federation may continue to advise its members in
negotiations with Delaware health care insurers through its "contract review service."
Defendant's Answering Br. at 11. Such a role raises serious concerns about Federation
representatives' access to confidential business information, such as documents reflecting
health care insurers' negotiating strategies. Third, the Federation represents physicians not
only in Delaware but also in surrounding states.2 The United States anticipates limited
discovery of confidential information in this case from health care insurers in surrounding
states. These health care insurers no doubt will share the concerns already expressed by
Delaware insurers about the Federation's ability to use the discovered confidential business
information in negotiations with these insurers.3


Page 3.      


   The Federation refuses to acknowledge any potential harm arising out of the disclosure
of health care insurers' confidential business information. Defendant's Answering Br. at 17.
The competitive harm to insurers that can be caused by the disclosure of such information,
however, was readily apparent to the court in Ball Memorial Hosp., Inc. v. Mutual Hosp. Ins.,
Inc.
, 784 F.2d 1325, 1346 (7th Cir. 1986). In Ball Memorial, the court considered whether a
protective order was necessary to prevent disclosure of health care insurers' confidential price
data. The court explicitly endorsed the kind of restrictions on disclosure of confidential
information that the United States proposes in its protective order in this case. In doing so, the
court recognized that, without such restrictions, the hospitals seeking access to the data could
cause anticompetitive harm by using it "to [their competitive ] advantage in the next round of
negotiations" or even to form "the basis of effective collusion." Id. at 1345-46.
   Nor does Jack Seddon's statement in his declaration, attached to Defendant's
Answering Brief, that he will not use non-parties' confidential information "for any purpose
other than to assist the FPD's outside counsel in the defense of this action or in preparation for
depositions or hearings in this case," (Seddon Dec. at ¶ 9) eliminate the non-parties' concern
about Federation employees' potential, improper use of non-parties' confidential information.4


Page 4.....      

Once Federation representatives learn the confidential information of non-party physicians and
health care insurers for purposes of litigation, it is not apparent how they can "unlearn" it
when they undertake contemporaneous or future negotiations with these insurers. SeeSafe
Flight Instrument Corp. v. Sundstrand Data Control, Inc.
, 682 F. Supp. 20, 22 (D. Del. 1988)
(noting that even a person of "great moral fiber" may have trouble mentally segregating
competitors' confidential information in the future); Phillips Petroleum Co. v. Rexene
Products, Co.
, 158 F.R.D. 43, 46 (D. Del. 1994) (noting concern for party's employee's
"unconscious, but improper use" in the future of confidential information despite any
protective order).

B.         The United States' Proposed Protective Order Does Not Hamper the
        Federation's Ability to Prepare its Defense

   Contrary to defendant's contention, the proposed protective order will not hamper the
Federation's ability to prepare for trial because it allows the Federation's counsel and
counsel's employees, as well as any testifying or consulting experts, automatic access to
confidential information. This form of disclosure will prove sufficient to enable defendant to
prepare for trial in this case. SeeBall Memorial, 784 F.2d at 1345 (endorsing a protective
order that would have limited access to health care insurer's confidential price data to
hospitals' trial counsel). The Federation does not even mention, in its Answering Brief, any
cases involving the type of protective order proposed by the United States, but the fact


Page 5.      

remains that Delaware courts have repeatedly endorsed this type of protective order. See, e.g.,
Safe Flight Instrument Corp., 682 F.Supp. at 22 (protective order limiting disclosure to trial
counsel and outside experts); Coca-Cola Bottling Co. v. Coca-Cola Co., 107 F.R.D. 288, 300
(D. Del. 1985) (proposing protective order limiting disclosure to trial counsel and independent
experts); Scovill Mfg. Co. v. Sunbeam Corp., 61 F.R.D. 598, 602 (D. Del. 1973) (protective
order limiting disclosure to trial counsel only). The Federation ignores such cases, and instead
cites several cases not involving any issue regarding a Rule 26(c)(7) protective order for the
misplaced proposition that "trial by ambush has no place in modern-day federal practice."
Defendant's Answering Br. at 8. The cases cited by the defendant involved disputes over a
party's complete withholding of information in discovery from both the opposing party and
the opposing party's counsel. Defendant's argument drawn from such cases has no place in a
reasoned discussion of the parameters of a protective order. The issue here is an umbrella
protective order affording full access to counsel, though restricting, but not precluding,
defendant's employees' access to confidential information.
   Contrary to the Federation's protestations, the proposed protective order does provide
a practical method through which testifying Federation representatives, such as Mr. Seddon,
can obtain access to confidential information. Under ¶ 7(g) of the proposed protective order,
defendant can seek disclosure of confidential information to Federation representatives "who
testify or who, trial counsel believes in good faith, may testify." The protected person may
then consent to disclosure or object to the disclosure, but the Court shall permit the disclosure
unless "the objecting protected person bears its burden of demonstrating good cause why the


Page 6..      

proposed disclosure should not be permitted."5 Proposed Protective Order at ¶ 8.
   The access provided under Paragraph 7(g) of plaintiff's proposed order is an effective
and fair way of governing disclosure of non-parties' confidential information in discovery
because it accommodates non-parties' good-faith objections to "full disclosure" of
confidential materials while preserving the right of access for Federation representatives Only
a tortured view of this provision would lead one to believe that this proposal will, as
defendant claims, "extend[] the litigation indefinitely." Defendant's Answering Br. at 7. Far
from leading to more litigation, the proposal provides an efficient way for non-parties to
designate material confidential, and it will ensure an orderly processing of any request by
defendant for its employees' access to confidential information.
   In contrast, under the protective order sought by the Federation -- that is, one that
allows Federation representatives complete access to confidential information -- non-parties
who object to producing confidential information will be forced to seek and litigate a series of
protective orders. Indeed, recognizing that such a process is unduly cumbersome, the Third
Circuit has endorsed the use of umbrella protective orders, such as plaintiff's proposed order,
because they "encourage efficiency and allow litigation to proceed more quickly." Cipollone
v. Liggett Group, Inc.
, 785 F.2d 1108, 1123 n.18 (3d Cir. 1985); see alsoStandard Chlorine of
Delaware, Inc. v. Sinibaldi
, 821 F.Supp. 232, 257 (D. Del. 1992) (umbrella confidentiality
order "would best serve the interests of just, prompt and efficient resolution" of the action).


Page 7.      

The proposed protective order should be entered in this case because it gives the parties and
nonparties the ability to negotiate in good faith and in an orderly manner the disclosure of
confidential documents, while reserving for the Court the ability to resolve disputes if
ultimately necessary.

II.   CONCLUSION
   The United States has proposed an umbrella protective order in response to
confidentiality concerns raised by non-parties. This protective order appropriately limits
pretrial disclosure of information that a producing party or non-party designates as
confidential. The order affords the parties' counsel and testifying and consulting experts full
access to confidential information, and establishes a workable procedure for disclosure of
confidential information to potential and actual trial witnesses. Accordingly, this Court
should enter the United States' proposed umbrella protective order.
                            Respectfully submitted,
COUNSEL FOR PLAINTIFF
UNITED STATES OF AMERICA

RICHARD G. ANDREWS
UNITED STATES ATTORNEY

          ____________/s/______________
By: Virginia Gibson-Mason (DSB # 3699)         
Assistant United States Attorney
1201 Market Street, Suite 1100
Wilmington, DE 19801
Tel.: (302)573-6277
Facsimile: (302)573-6220


___________/s/____________________
Melvin A. Schwarz
Special Counsel for Enforcement
U.S. Department of Justice
Antitrust Division

601 D Street, N.W.
Washington, D.C. 20530
Tel.: (202) 305-1210
____________/s/______________
Steven Kramer
Richard S. Martin
Denise E. Biehn
Michael D. Farber
Heather H. Howard,
Attorneys
U.S. Department of Justice
Antitrust Division
325 Seventh Street, N.W.
Washington, D.C. 20530
Tel.: (202) 307-0997
Facsimile: (202) 514-1517

Dated: January 22, 1999



                UNITED STATES DISTRICT COURT
               FOR THE DISTRICT OF DELAWARE

______________________________________
)  
)  
UNITED STATES OF AMERICA, ) CA 98-475 JJF
)  
                    Plaintiff, )  
)  
          vs. )  
)
FEDERATION OF PHYSICIANS AND )
DENTISTS, INC., )
)
                    Defendant. )
)
______________________________________)


                    APPENDIX TO THE
     PLAINTIFF'S REPLY TO DEFENDANT'S ANSWERING BRIEF
         IN OPPOSITION TO PLAINTIFF'S MOTION FOR
         ENTRY OF ITS PROPOSED PROTECTIVE ORDER



Dated: January 22, 1999

COUNSEL FOR PLAINTIFF
UNITED STATES OF AMERICA

RICHARD G. ANDREWS
UNITED STATES ATTORNEY

          By: Virginia Gibson-Mason (DSB # 3699)         
Assistant United States Attorney
1201 Market Street, Suite 1100
Wilmington, DE 19801
Tel.: (302)573-6277

Melvin A. Schwarz
Special Counsel for Enforcement
U.S. Department of Justice
Antitrust Division
601 D Street, N.W.
Washington, D.C. 20530
Tel.: (202) 305-1210
Steven Kramer
Richard S. Martin
Denise E. Biehn
Michael D. Farber
Heather H. Howard,
Attorneys
U.S. Department of Justice
Antitrust Division
325 Seventh Street, N.W.
Washington, D.C. 20530
Tel.: (202) 307-0997


Page i      

                      APPENDIX

                    TABLE OF CONTENTS

Josh Goldstein, "U.S. Says Doctor Union is Antitrust Conspiracy,"
The Philadelphia Inquirer, August 14, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C 1 - 2


FOOTNOTES

1 Amended Answer (D.I. 11) at ¶ 63. Indeed, the Federation's defense of this lawsuit seeks to vindicate its misconceived notion that it can negotiate contracts with health care insurers for nearly all Delaware orthopedic surgeons.

2 See, e.g., Josh Goldstein, "U.S. Says Doctor Union is Antitrust Conspiracy," The Philadelphia Inquirer, August 14, 1998. Appendix at C1-C2.

3 Indeed, one of these insurers, Independence Blue Cross of Pennsylvania, through the declaration of the Director of Provider Relations of an affiliate organization, AmeriHealth, has expressed its concern about the Federation representatives' access to its confidential information in a declaration. Declaration of Marcy Wilkinson at ¶¶ 6-8 (Appendix to United States' Opening Br. at A11-A17).

4 One Delaware health care insurer has specifically raised this concern in its declaration submitted with the United States' Opening Brief, stating that "Federation employees given access would be unable to build a so-called ‘fire-wall' in their minds once exposed to the information. It would be impossible for them to comply with Paragraph 7's prohibition that the information be used ‘only as necessary in this action.'" Declaration of Marcy Wilkinson at ¶ 8 (Appendix to United States' Opening Br. at A12). Although Defendant's Answering Brief argues that non-parties' confidential information will not automatically be provided to Federation employees, counsel for defendant has candidly recognized that, in practice, the provision in dispute will allow Federation employees "full access" to non-parties' confidential information. Letter from Mary Beth Fitzgibbons (counsel for defendant) to Michael Farber (counsel for plaintiff) (December 2, 1998) (Appendix to United States' Opening Br. at A1).

5 These measured provisions allowing Federation employees access to non-parties' confidential information, as well as decisions of this Court, cited both on the previous page and in Plaintiff's Opening Brief (at 8), expose the factual and legal inaccuracy of defendant's claim that, "[t]he Government cites no authority in its Opening Brief supporting its contention that a court would absolutely preclude a party from access to information." Defendant's Answering Br. at 17.