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

Virginia Gibson-Mason (DSB # 3699)	Steven Kramer

Assistant United States Attorney	Richard S. Martin

1201 Market Street, Suite 1100	Denise E. Biehn

Wilmington, DE 19801	Michael D. Farber

Tel.: (302) 573-6277	Heather H. Howard

Jean Lin

Melvin A. Schwarz	Attorneys

Special Enforcement Counsel	U.S. Department of Justice

U.S. Department of Justice	Antitrust Division

Antitrust Division	325 Seventh Street, N.W.

601 D Street, N.W.	Washington, D.C. 20530

Washington, D.C. 20530	Tel.: (202) 307-0997

Tel.: (202) 305-1210

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

i.

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

ii.

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.

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. 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. 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.

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. 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. See Safe 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. See Ball 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 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 proposed disclosure should not be permitted." 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 also Standard 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). 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/___________________	___________/S/____________

By: Virginia Gibson-Mason (DSB # 3699)	Steven Kramer

Assistant United States Attorney	Richard S. Martin

1201 Market Street, Suite 1100	Denise E. Biehn

Wilmington, DE 19801	Michael D. Farber

Tel.: (302)573-6277	Heather H. Howard

Facsimile: (302)573-6220	Jean Lin

Attorneys

U.S. Department of Justice

Antitrust Division

____________/S/____________________	325 Seventh Street, N.W.

Melvin A. Schwarz	Washington, D.C. 20530

Special Counsel for Enforcement	Tel.: (202)307-0997

U.S. Department of Justice	Facsimile: (202)514-1517

Antitrust Division

601 D Street, N.W.

Washington, D.C. 20530

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

Virginia Gibson-Mason (DSB # 3699)	Steven Kramer

Assistant United States Attorney	Richard S. Martin

1201 Market Street, Suite 1100	Denise E. Biehn

Wilmington, DE 19801	Michael D. Farber

Tel.: (302) 573-6277	Heather H. Howard

Jean Lin

Melvin A. Schwarz	Attorneys

Special Enforcement Counsel	U.S. Department of Justice

U.S. Department of Justice	Antitrust Division

Antitrust Division	325 Seventh Street, N.W.

601 D Street, N.W.	Washington, D.C. 20530

Washington, D.C. 20530	Tel.: (202) 307-0997

Tel.: (202) 305-1210

APPENDIX

TABLE OF CONTENTS

Josh Goldstein, "U.S. Says Doctor Union is Antitrust Conspiracy,"

The Philadelphia Inquirer, August 14, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C 1 - 2