Blue Cross And Blue Shield Association v. UHS of Delaware, Inc. et al

Filing 103

MEMORANDUM Opinion and Order. Signed by the Honorable Geraldine Soat Brown on 2/25/2014.(psm, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BLUE CROSS AND BLUE SHIELD
ASSOCIATION,
Plaintiff,

)
)
)
)
v.
)
)
UHS OF DELAWARE, INC., UNIVERSAL )
HEALTH SERVICES, INC.,
)
WELLINGTON REGIONAL MEDICAL
)
CENTER, INC., and DOES 1-10,
)
Defendants.
)

No. 12 C 8196
Judge Gary Feinerman
Magistrate Judge Geraldine Soat Brown

MEMORANDUM OPINION AND ORDER
Geraldine Soat Brown, Magistrate Judge
Plaintiff Blue Cross and Blue Shield Association (“BCBS”) seeks a protective order requiring
that certain filings by defendants UHS of Delaware, Inc., Universal Health Services, Inc. and
Wellington Regional Defendants Medical Center, Inc. (collectively, “UHS”) be maintained under
seal because BCBS believes those filings violate a confidentiality provision of a prior settlement
agreement. (Pl.’s Mot. Prot. Order) [Dkt 40.]1 UHS opposes BCBS’s motion. (Defs.’ Resp.) [Dkt

1

Some of the briefs filed in connection with BCBS’s motion for a protective order and
defendants’ motion to defer ruling were filed under seal. This opinion will cite to the redacted
versions of the documents. The corresponding sealed versions are as follows:
Document

Sealed Version

Redacted Version

Defs.’ response to BCBS’s
motion for a protective order

Dkt 99

Dkt 50

BCBS’s reply in support of
its motion for a protective
order

Dkt 97

Dkt 55

50.] UHS also asks the court to defer ruling on BCBS’s motion so it can pursue discovery in an
effort to refute a statement made by BCBS in its reply. (Defs.’ Mot. to Defer) [Dkt 62.]2 For the
following reasons, both motions are denied.

Background
BCBS provides health insurance, and UHS provides healthcare services. (First Am. Compl.
¶¶ 10, 15.) [Dkt 27.] In this lawsuit, BCBS asserts, among other things, that UHS infringed its
trademarks and breached a contract, specifically, a settlement agreement resolving a prior lawsuit

Barnhart declaration
supporting BCBS’s reply in
support of its motion for a
protective order

Dkt 98

Dkt 56

Defs.’ motion to defer ruling
on BCBS’s motion for a
protective order

Dkt 60

Dkt 62

Defs.’ answer and affirmative
defenses

Dkt 34

Dkt 45

Defs.’ motion to dismiss

Dkt 35

Dkt 46

Defs.’ memorandum in
support of its motion to
dismiss

Dkt 37

Dkt 47

2

The District Judge granted UHS’s request to refile its motion under seal and struck the
originally filed version. (Order, Aug. 16, 2013.) [Dkt 66.] Hence, both the original version (now
under seal) and the corresponding redacted version are pending because the originally filed
version [dkt 60] was stricken only as an administrative matter to allow it to be removed from the
public docket.
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between the parties, Blue Cross & Blue Shield Assn. v. UHS of Delaware, Inc., No. 09 C 7935 (N.D.
Ill.). (Id. ¶¶ 40-43.).3
In its motion, BCBS asserts that the settlement agreement contains a confidentiality
provision requiring the parties to keep certain information confidential and that UHS breached that
confidentiality provision by disclosing confidential information in its responsive pleadings in this
lawsuit (Pl.’s Mot. at 1, 3.) BCBS notes that UHS’s filings include an unredacted copy of the
settlement agreement. (Id. at 3.) BCBS asks the court to expunge from the public record and file
under seal UHS’s counterclaim and all of its exhibits, UHS’s motion to dismiss and all of its
exhibits, and UHS’s memorandum in support of its motion to dismiss. (Id. at 5.) As a “first
alternative,” BCBS asks that specific paragraphs of UHS’s filings, including paragraphs 13 and 15
of UHS’s counterclaim, be redacted or filed under seal. (Id.) The District Judge placed UHS’s
filings [dkt 34, 35 and 37] under seal provisionally and ordered redacted versions filed. (Order, July
16, 2013.) [Dkt 42.]4 The propriety of maintaining the seal is the issue presently before the court.
Interestingly, BCBS does not include a copy of the settlement agreement as an exhibit to its
motion nor even quote the purported confidentiality provision. Its reference to UHS’s having
included the settlement agreement in its filings does not include a citation to the docket where the

3

BCBS invokes diversity and federal question jurisdiction. See 28 U.S.C. §§ 1332,
1331. BCBS’s invocation of diversity jurisdiction is doubtful because the complaint named ten
Does as defendants. (Am. Compl. ¶ 15.) For the purposes of diversity jurisdiction, a complaint
must affirmatively establish each party’s citizenship. See Guaranty Natl. Title Co. v. J.E.G.
Assocs., 101 F.3d 57, 58 (7th Cir. 1996). Hence, “unknown defendants (who are necessarily of
unknown citizenship) foreclose any possible allegation of total diversity.” Bryant v. Yellow
Freight Systems, 989 F. Supp. 966, 968 (N.D. Ill. 1997). BCBS’s pleading of federal trademark
claims, however, secures federal jurisdiction.
4

UHS filed redacted versions of its answer and affirmative defenses [dkt 45], its motion
to dismiss [dkt 46] and its memorandum in support of its motion to dismiss [dkt 47.]
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court might find the agreement. In fact, the settlement agreement appears in the public record in
redacted form as Exhibit A to UHS’s redacted Answer and Counterclaims [dkt 45], and in complete
form as Exhibit A to UHS’s originally-filed Answer and Counterclaims [dkt 34], which is now under
seal. The confidentiality provision – the provision upon which BCBS bases its present motion – is
completely redacted in the public version. [Dkt 45, Ex. A ¶8.]
As a threshold matter, UHS moves to defer ruling on BCBS’s motion so that UHS can take
discovery regarding a statement made in a declaration filed by BCBS in support of its motion.
BCBS filed a declaration by one of its employees, Emily Barnhart, in which Ms. Barnhart makes a
representation about other settlements BCBS has entered into, in contrast to the one between BCBS
and UHS. (Decl. Emily Barnhart ¶ 4.) [Dkt 56.] UHS wants to take discovery about those other
settlements. According to UHS, it is “entitled to completely examine this new issue interjected into
this matter unilaterally by BCBSA so that the Court can be fully apprised of the facts surrounding
this assertion before issuing any ruling on [BCBS’s] motion.” (Defs.’ Mot. to Defer at 4.) For the
reasons set out below, however, additional factual material on that point is not necessary. Ms.
Barnhart’s assertion is not germane to whether BCBS is entitled to keep the terms of the settlement
agreement out of the public record in this case. Accordingly, UHS’s motion to defer ruling is denied.

Discussion
Federal Rule of Civil Procedure 26(c) authorizes the court to issue protective orders when
the moving party makes a showing of “good cause.” See Fed. R. Civ. P. 26(c)(1). Although BCBS
argues that sealing the filings here would help BCBS and not harm UHS, the filing of documents on
the docket under seal implicates considerations beyond the interests of the parties. “The general rule
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is that the record of a judicial proceeding is public.” Jessup v. Luther, 277 F.3d 926, 927 (7th Cir.
2002). “People who want secrecy should opt for arbitration. When they call on the courts, they must
accept the openness that goes with subsidized dispute resolution by public (and publically
accountable) officials. Judicial proceedings are public rather than private property.” Union Oil Co.
v. Leavell, 220 F.3d 562, 568 (7th Cir. 2000). Those considerations create a presumption against
sealing documents filed on the docket, which can be overcome when there is a “compelling interest
in secrecy.” Jessup, 277 F.3d at 928.
BCBS argues that it should be entitled to maintain the confidentiality that it bargained for in
the settlement agreement. It points to Grove Fresh Distributors, Inc. v. John Labatt Ltd., 888 F.
Supp. 1427 (N.D. Ill. 1995), aff’d by 134 F.3d 374 (7th Cir. 1998) (nonprecedential disposition), in
which the trial court stated that “absent special circumstances, a court should honor confidentialities
that are bargained-for elements of settlement agreements.” 888 F. Supp. at 1441 (internal quotations
omitted). The court’s statement was made in the context of holding a lawyer in contempt for
violating a protective order that had been entered based on the lawyer’s pattern of disclosing
protected information to extract settlement. Id. at 1438.
The present motion, however, comes in a very different context. BCBS brought this lawsuit
for the purpose of enforcing the settlement agreement. The Seventh Circuit has observed that
“[o]rdinarily . . . settlement agreements, like most arbitration awards and discovery materials, are
private documents.” Jessup, 277 F.3d at 928. That changes, however, when enforcement of the
settlement agreement is itself the subject of the lawsuit. In that situation, the Seventh Circuit has
held that “[a] settlement agreement is a contract, and when parties to a contract ask a court to
interpret and enforce their agreement, the contract enters the record of the case and thus becomes
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available to the public, unless it contains information such as trade secrets that may legitimately be
kept confidential.” Herrnreiter v. Chi. Hous. Auth., 281 F.3d 634, 636 (7th Cir. 2002). “[T]he
dispositive documents in any litigation enter the public record notwithstanding any earlier
agreement” even though “many litigants would like to keep confidential the salary they make, the
injuries they suffered, or the price they agreed to pay under a contract, but when these things are vital
to claims made in litigation they must be revealed.” Baxter Intl., Inc. v. Abbott Laboratories, 297
F.3d 544, 546-47 (7th Cir. 2002) (emphasis in original). “Many a litigant would prefer that the
subject of the case – how much it agreed to pay for the construction of a pipeline, how many tons
of coal its plant uses per day, and so on – be kept from the curious (including its business rivals and
customers), but the tradition that litigation is open to the public is of very long standing.” Union Oil
Co., 220 F.3d at 567.
When the terms of a settlement “become an issue in a subsequent lawsuit . . . . the
presumption of a right of public access to court documents should apply.” Goesel v. Boley Intl.
(H.K.) Ltd., 738 F.3d 831, 834 (7th Cir. 2013) (Posner, J., in chambers). That is the case here: the
part of the settlement agreement that BCBS wants sealed is a subject of dispute between BCBS and
UHS.
In pleading its breach of contract count, BCBS alleges that it performed all obligations
required of it under the settlement agreement except those excused by UHS’s alleged breaches. (Am.
Compl. ¶ 42.) UHS’s counterclaim, however, alleges that BCBS has not performed all of the
conditions of the settlement agreement and, specifically, that BCBS has failed to perform a particular
obligation that BCBS undertook in the settlement agreement. (Defs’ Counterclaim ¶¶ 13 -23.) It
is this obligation that BCBS does not want disclosed.
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BCBS, correctly, does not argue that the terms of settlement agreement constitute a trade
secret or that disclosure would “seriously compromise personal or institutional privacy or national
security.” Goesel, 738 F.3d at 835. Instead, it argues that it rarely enters into agreements with the
subject term, and that knowing BCBS entered into an agreement with UHS including the subject
term would have “economic value to third parties. ” (Barnhart Decl. ¶¶ 4, 5; Pl.’s Reply at 1.) BCBS
fears that disclosure of the subject term would hurt its litigation and negotiation strategies. (Barnhart
Decl.¶ 5.)
This argument fails because, as discussed above, “[p]eople who want secrecy should opt for
arbitration.” See Union Oil, 220 F.3d at 568; see also Huntington Natl. Bank v. Greenwood Place,
LP, No. 1:09-CV-1110-TWP-TAB, 2012 WL 692601 at *3 (S.D. Ind. Mar. 2, 2012) (rejecting
movant’s request to maintain seal on personal financial information where that information was “at
the heart of this dispute” and noting that if the movant “wanted to keep his financial condition under
a veil of secrecy, he could have negotiated an arbitration clause”).
BCBS did not opt for arbitration. Instead, it filed a second federal lawsuit asserting that UHS
breached the settlement agreement. In doing so, BCBS put at issue whether it complied with its own
obligations under the settlement agreement. UHS denies that BCBS complied and counterclaims
for enforcement of BCBS’s obligations. Those issues are at the heart of what the court is to decide
in this case. BCBS cannot keep the disputed term, which UHS alleges BCBS breached, out of the
public record.
The desire to keep a term in a settlement agreement confidential is common.

See

Herrnreiter, 281 F.3d at 637. That desire, however, “is not nearly on a par with national security
and trade secret information. Now that the agreement itself has become a subject of litigation, it
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must be opened to the public just like other information (such as the wages paid to an employee, or
the price for an architect’s services) that becomes the subject of litigation.” Id.
In sum, the Seventh Circuit has “uniformly rejected” parties’ “requests to seal proceedings
in order to implement the parties’ preference for seclusion.” Union Oil, 220 F.3d at 568 (collecting
cases). Accordingly, BCBS’s motion for a protective order is denied.

Conclusion
For the foregoing reasons, defendants’ motion to defer ruling on BCBS’s motion for a
protective order [dkt 62] and BCBS’s motion for a protective order [dkt 40] are denied. The
documents that were provisionally filed under seal shall remain under seal through March 3, 2014.
On March 4, 2014, the Clerk of the Court will be directed to place the sealed versions of the
documents listed in footnote 1 in the public record.

___________________________
Geraldine Soat Brown
United States Magistrate Judge
February 25, 2014

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