Plaintiff's Reply to Defendant's Answering Brief in Opposition to Plaintiff's Motionfor Entry of Plaintiff's Proposed Scheduling Order

    PLAINTIFF'S REPLY TO DEFENDANT'S ANSWERING BRIEF IN OPPOSITION TO
                   

                                         A. Under Either a                                                                                               

                        Cases
 

  All Care Nursing Serv., Inc. v. High Tech Staffing Serv., Inc., 135 F.3d 740 (11^th Cir. 1998)......3
 

  American Medical Ass'n v. United States, 130 F.2d 233 (D.C.Cir. 1942),   (1943)........................................................................................................... ....................................7
 

  Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982)..............................................4
 

  Associated Container Transportation v. United States, 705 F.2d 53 (2d Cir. 1983).....................10
 

  Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979)....................2, 4
 

  Fashion Originator's Guild of America, Inc. v. F.T.C., 312 U.S. 457 (1941).................................7
 

  F.T.C. v. Sup. Ct. Trial Lawyers Ass'n, 493 U.S. 411 (1990)......................................................2,4
 

  F.T.C. v. Indiana Federation of Dentists, 476 U.S. 447 (1986)...............................................2, 4, 7
 

  National Soc. of Professional Engineers v. United States, 435 U.S. 679 (1978).........................2, 4
 

  N.C.A.A. v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984)................................2, 4, 5, 6
 

    (1985)........................................................................................................... ....................................3
 

  Oklahoma Press Pub. Co. v. Walling, 327 U.S. 186 (1946)..........................................................11
 

  Sterling Drug, Inc. v. Clark, 1968 Trade Cas. ¶72,629 (S.D.N.Y. 1968)................................12, 13
 

  United States v. Brown Univ., 5 F.3d 658 (3d Cir. 1993)...............................................................5
 

  United States v. Sargent Electric Co., 785 F.2d 1123 (3d Cir. 1986)............................................11
 

                I.                          activity is analyzed under the antitrust rule of "per                          II.            Under Either a Per                               analysis, rather than be analyzed under the per                              "illegal per              of the restraint, and the reasons why it was imposed.1
 

  F.T.C. v. Sup. Ct. Trial Lawyers Ass'n, 493 U.S. 411, 433 (1990) ("Trial Lawyers") (quoting
        that category of behavior to which we apply the label ‘per  a simple matter."                                         conduct that is legally and economically indistinguishable from the challenged conduct in     their services . . . implemented by a concerted refusal to serve an important customer,"     of trade that was perse illegal.2  anticompetitive nature of the challenged conduct, application of the rule of per        defendant's conduct in this case is entirely appropriate and will subserve a major purpose of the
  per  and effect of restraints of trade in every case.   U.S. 331, 342-344 and nn.14-16 (1982);       condemned as illegal per         analysis, rather than the per  consideration of the impact on competitive conditions.'"   of Oklahoma, 468 U.S. 85, 103 (1984) (quoting          an agreement.'" N.C.A.A. v. Board of Regents of Univ. Of Oklahoma, 468 U.S. at 109 (quoting
  Professional Engineers, 435 U.S. at 692); cf.                   to avoid a reduction in fees paid by Blue Cross--defendant could escape application of the per                 even remotely suggest that defendant's challenged conduct "increase[s] economic efficiency,"
          applied in the twinkling of an eye.'" N.C.A.A., 468 U.S. at 109-10 n.39 (citation omitted); see
                                       Concerted Action that Violates the Antitrust Laws and Is Thus Beyond the Proper
                             competitive conditions,"                                  prevent it." F.T.C. v. Indiana Federation of Dentists, 476 U.S. 447, 464 (1986). In   Medical Ass'n v. United States, 130 F.2d 233 (D.C. Cir. 1942),                                                                                                                                         

                        Plaintiff's Request for Nationwide Relief Should Not Implicate the Scope of
                                                                         prohibit activities beyond the scope of the proven violation. See                         The Department of Justice's Issuance of Civil Investigative Demands to

                      Equally important, CIDs issued since the filing of this case by the Department in connection with
its investigations of the Federation's activities in Dayton, Ohio and Tampa, Florida have been issued in
full compliance with applicable statutes and case law. "Congress has explicitly authorized the Antitrust
Division [of the Department of Justice] to request the production of any documentary material, answers to
written interrogatories or oral testimony which it has reason to believe is relevant to a civil antitrust
investigation, 15 U.S.C. § 1312(a)."                      

antitrust investigation."8   This statutory authorization and attendant limitation pose no impediment to the Department's
issuance of CIDs, after the institution of this civil action in Delaware, for the purpose of ascertaining
whether additional antitrust violations have been committed by the Federation or its members in
Connecticut, Ohio, or Florida. Although those investigations and the investigation leading to this case
each involve the Federation, they focus on procuring potential evidence of conspiracies, engaged in by
different physicians, that affect different consumers in different areas of the country. In such
circumstances, the institution of this case cannot be reasonably viewed as the institution of a civil
proceeding on any of the other investigations being conducted outside Delaware. SeeUnited States v.
Sargent Electric Co., 785 F.2d 1123, 1130-31 (3d Cir. 1986) (holding that the defendants engaged in
multiple conspiracies to fix prices where conspiracies affected separate markets and were carried out in
different geographic areas). Thus, contrary to defendant's argument, the issuance of CIDs in any of those
non-Delaware investigations complies fully with the Supreme Court's observation, in an analogous
context, that the purpose of CIDs "is to discover and procure evidence, not to prove a pending charge or
complaint, but upon which to make one if, in the Administrator's judgment, the facts thus discovered
should justify doing so."          Moreover, defendant's Answering Brief conspicuously omits discussion of Sterling Drug, Inc. v.
Clark, 1968 Trade Cas. ¶ 72,629 (S.D.N.Y. 1968), an opinion enforcing a CID issued by the Antitrust
Division that was challenged on grounds strikingly similar to the argument made by defendant here.10 In
Sterling Drug, one of the defendants in a civil antitrust case brought by the United States sought
unsuccessfully to quash a CID on the ground that the Division had commenced a civil antitrust action
against it in U.S. District Court in New Jersey before the CID was issued and could not enforce CIDs
thereafter under the "prior to . . . " language of 15 U.S.C. § 1312(a). The underlying circumstances in
                        authority of the Antitrust Division to issue civil investigative demands in any other area.
 

   Similarly, the CIDs issued by the Division, after the complaint was filed in this case, in its
investigations in the Dayton and Tampa areas cover localities obviously not covered by this action. As in
Sterling, the CID that was issued to the Federation in early September in connection with the Division's
investigation in the Tampa area, expressly excludes, from the definition of documents, "any documents
relating solely to the F[ederation]'s activities in Delaware[.]"11 Under these circumstances, the reasoning
of Sterling Drug squarely warrants rejection of defendant's claim here that CIDs may not be issued after
the filing of this case in connection with other investigations conducted to ascertain whether there are
discrete violations outside Delaware.
 

III.     Defendant's opposition to plaintiff's proposed discovery schedule stems largely from defendant's
utter disregard of a substantial body of settled antitrust precedent that was established precisely to prevent
antitrust cases from becoming what defendant apparently wants to turn this lawsuit into: an unduly costly
and protracted proceeding due to a failure to keep the focus on the issues that are relevant under antitrust
law. Whether this case is ultimately decided under the perFor these reasons, this Court should reject defendant's arguments for delay and prejudicial limits on plaintiff's necessary discovery and grant plaintiff's motion in support of its discovery schedule by
entering a discovery schedule leading to a trial in this case commencing on or after June 1, 1999.
 

Dated: November 23, 1998
 

COUNSEL FOR PLAINTIFF
UNITED STATES OF AMERICA
 

RICHARD G. ANDREWS
UNITED STATES ATTORNEY
 

FOOTNOTES

2 Despite this case's focus on defendant's leadership of its members' concerted refusal to deal to obtain higher fees, defendant's Answering Brief, "D.I. 24," at 10, cites cases involving alleged boycotts whose likely competitive effects were ambiguous on their face to support its argument that this case should be adjudged under the rule of reason, rather than the per se rule. E.g., Northwest Wholesale Stationers, Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284 (1985) (buying association's expulsion of a member not subject to per se analysis); All Care Nursing Serv., Inc. v. High Tech Staffing Servs., Inc., 135 F.3d 740 (11^th Cir. 1998) (temporary nursing agencies' challenge to arrangements under which certain nursing agencies were chosen as preferred providers of temporary nurses not per se illegal). Notably, Defendant's Answering Brief fails even to acknowledge, much less discuss, the Supreme Court's Trial Lawyers opinion, which is factually on point.

3 See, e.g., Trial Lawyers, 493 U.S. at 432-33 (ruling that Court of Appeals erred in "assuming that the antitrust laws permit, but do not require, the condemnation of price fixing and boycotts without proof of market power"); Arizona v. Maricopa County Medical Society, 457 U.S. at 348-49 (reversing Ninth Circuit's refusal to apply the per se rule to nonprofit medical foundations' agreements with their participating doctors, placing limitations upon the fees the physicians could charge some of their patients).

4 The first area warrants no discussion here because the United States' Answering Brief, "D.I. 22," at 6-7, fully refutes defendant's claim to need extensive discovery concerning "the Government's policies on the unionization of physicians and antitrust enforcement in the health care industry.... [and] the Government's promulgation, interpretation and enforcement of the [third party messenger] system." Defendant's Answering Brief, "D.I. 24," at 13.

5 In connection with its attempt to vilify Blue Cross as a purported defense to this action, defendant claims the need "[t]o vigorously probe the truth of the representations [Blue Cross] has made to providers, policy holders, and the public, and fully expects to uncover evidence of lying, and possibly, of outright fraud on the citizens of Delaware." Defendant's Answering Brief, "D.I. 24," at 12.

6 The Supreme Court's rejection in Fashion Originator's Guild of America, Inc. v. F.T.C., 312 U.S. 457 (1941), of a claim similar to defendant's claim in this case is also instructive. In Fashion Originator's, the defendants, designers and manufacturers of original women's fashions, claimed that their boycott was "reasonable and necessary to protect the manufacturer, laborer, retailer and consumer against the devastating evils growing from [competitors'] pirating of original designs." Id. at 467. In upholding the Federal Trade Commission's exclusion of the defendants' evidence proffered in support of their claim, the Supreme Court held that, "even if copying were an acknowledged tort under the law of every state, that situation would not justify [defendants] in combining together to regulate and restrain interstate commerce in violation of federal law." Id. at 468.

7 Amended Answer and Defenses (D.I. 11) at ¶ 63.

8 The term "antitrust investigation" is defined in 15 U.S.C. § 1311(c) to mean "any inquiry . . . for the purpose of ascertaining whether any person is or has been engaged in any antitrust violation . . . ."

9 This language, quoted by defendant from Oklahoma Press--the only case defendant cites purportedly in support of its argument--stands for nothing more than the principle underlying the authorization of CIDs. The Court enunciated this principle in the context of an opinion resolving a challenge to the validity of investigative subpoenas issued by the Administrator of the Wage and Hour Division of the Department of Labor under a different statutory authorization than the one at issue here. The quoted language simply begs the question of whether the issuance of CIDs in any particular antitrust investigation is "prior to the institution of a civil or criminal proceeding thereon." But the opinion itself sheds no light on the answer because the challenged subpoenas were issued during an investigation before the institution of any proceeding and were challenged on statutory and constitutional grounds that are wholly unrelated to the question at issue here. Id. at 495-97. Thus, defendant has cited no case that provides specific authority for its argument.

10 The United States first brought this opinion to defense counsel's attention in a letter dated October 5, 1998, after defense counsel raised this argument initially at the Rule 26(f) conference on October 1. Indeed, the United States believed that Sterling Drug had set the issue to rest because defendant proposed no such limitation on the Department's issuance of CIDs in these other investigations in either the Proposed Discovery Plan, "D.I. 13," or in defendant's Motion for Entry of a Scheduling Order That Incorporates Its Proposed Discovery Plan and Schedule "D.I. 18." In view of these circumstances, defendant's resurrection of this issue in its Answering Brief is odd, to say the least.

11 Unlike the petitioner in Sterling Drug, the Federation did not move, pursuant to 15 U.S.C. § 1314(b), to quash the CID issued to obtain information relevant to its activities in Tampa. Rather, the Federation is in the process of complying with the CID, likely recognizing that the opinion in Sterling Drug rendered such a petition futile. Nonetheless, defendant has attempted--in tension with the case law--to inject this issue into this case to support its argument for a protracted discovery schedule.