Federal Trade Commission et al v. Penn State Hershey Medical Center et al

Filing 75

MEMORANDUM AND ORDER - IT IS ORDERED that this witness identity also be disclosed, subject to the series of reasonable and prudent caveats previously imposed by the Court. Signed by Magistrate Judge Martin C. Carlson on February 29, 2016. (kjn)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
FEDERAL TRADE COMMISSION and :
COMMONWEALTH OF
:
PENNSYLVANIA,
:
:
Plaintiffs
:
:
v.
:
:
PENN STATE HERSHEY MEDICAL
:
CENTER, et al.,
:
:
Defendants
:

Civil No. 1:15-CV-2362

(Judge Jones)
(Magistrate Judge Carlson)

MEMORANDUM AND ORDER
THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:
In this case we are called upon to further determine the proper scope of a
protective order in complex merger litigation. The pertinent facts can be simply
stated: The Defendants, Penn State Hershey Medical Center and PinnacleHealth
System, have been engaged in merger negotiations. The Plaintiffs, the Federal Trade
Commission and the Commonwealth of Pennsylvania, have now filed this action in
federal court seeking to enjoin this corporate merger. The district court has set an
accelerated schedule for discovery and an evidentiary hearing in this case, and the
parties have entered into a protective order governing confidential information, (Doc.
48.), which has subsequently been amended by the Court. (Doc. 53.)

We previously entered a protective order governing the scope of disclosure of
the identities of any potential witnesses that the FTC and Commonwealth may call
in these proceedings. That order provided in part that: First, on or before February
22, 2016, counsel for Plaintiffs were to notify defense counsel regarding whether they
reserve the right to rely on any information provided by the witnesses objecting to
disclosure of their identities in the litigation of this case. Second, if the Plaintiffs
reserved the right to potentially rely upon information provided by these objecting
witnesses, the Defendants were instructed to designate to the Plaintiffs in-house
counsel as to whom the identity of these witnesses will be disclosed. Third,
designated in-house counsel will then attest in writing that: (1) they do not take part
in competitive decision-making in the area encompassed by the confidential
disclosure; (2) they agree to be otherwise bound by the terms of any prior protective
orders; (3) they agree that they will not use the confidential information directly or
indirectly for any purpose other than defending the FTC litigation; and (4) they
acknowledge that violations of the order may subject in-house counsel to sanctions,
including contempt. Finally, upon receipt of this attestation from Defendant’s inhouse counsel, Plaintiffs’ counsel were to notify Defendants within 24 hours if they
object to a particular disclosure, which objection will be referred to the undersigned
for resolution.
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Following this procedure we were notified by Plaintiffs that one potential
witness continued to object to this disclosure, noting that the witness had previously
had unsuccessful business dealings with in-house counsel and voicing a concern that
counsel might affect future business referrals to the witness. We conferred with
counsel, and entertained a vigorous argument made by the Plaintiffs on behalf of this
prospective witness. Despite the force of the Plaintiffs’ argument we have concluded
that disclosure of this witness’ identity, subject to all of the safeguards we have
imposed, is appropriate here.
When considering protective orders which impose restrictions on access to
confidential information by corporate in-house counsel, “courts must balance the ‘one
party's right to broad discovery and the other party's ability to protect its confidential
materials from misuse . . . .’ Avocent Redmond Corp. v. Rose Electronics, 242
F.R.D. 574, 577 (W.D.Wash.2007) (citing U.S. Steel Corp., 730 F.2d at 1468). The
key inquiry is whether the attorney in question is in fact a competitive decisionmaker. Id. (citing U.S. Steel Corp., 730 F.2d at 1470).” Presidio Components, Inc.
v. Am. Tech. Ceramics Corp., 546 F. Supp. 2d 951, 955 (S.D. Cal. 2008). In FTC
litigation in-house counsel typically may have access to confidential information
subject to certain reasonable constraints, including requirements that in-house
counsel: (1) attest that they do not take part in competitive decision-making in the
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area encompassed by the confidential disclosure; (2) agree to be otherwise bound by
the terms of any protective order; (3) agree that they will not use the confidential
information directly or indirectly for any purpose other than defending the FTC
litigation; and (4) acknowledge that violations of the order may subject in-house
counsel to sanctions, including contempt. Fed. Trade Comm'n v. Sysco Corp., 83 F.
Sup p. 3d 1, 3 (D.D.C. 2015) (citing F.T.C. v. Whole Foods Market, Inc., No.
07–1021, 2007 WL 2059741 (D.D.C. July 6, 2007); F.T.C. v. Foster, No. CIV 07-352
JBACT, 2007 WL 2219410, at *10 (D.N.M. Apr. 26, 2007). The courts have also
provided a mechanism for the FTC to lodge specific objections to particular in-house
counsel disclosures based upon assertions that counsel are, in fact, actively involved
in competitive decision-making in the precise areas of concern. See Fed. Trade
Comm'n v. Sysco Corp., 83 F. Sup p. 3d 1, 3 (D.D.C. 2015).
In reaching these results, the courts have consistently recognized that a blanket
prohibition on any access to information concerning the identity of witnesses in FTC
litigation by corporate in-house counsel distorts the balance between one party's right
to broad discovery and the other party's ability to protect its confidential materials.
Such a total ban on disclosure also which unfairly prejudices the defense of important
litigation for the corporate defendants. Here, in-house counsel has followed these
procedures and attested that counsel is not involved in referral decisions relating to
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this prospective witnesses, and has agreed to adhere to the limitations we have
imposed upon use of this information. Given these assurances by counsel, and guided
by these benchmarks, in the exercise of our discretion we conclude that the
safeguards in place are sufficient to protect the interests of potential witnesses, while
also promoting disclosure of information. Therefore, IT IS ORDERED that this
witness identity also be disclosed, subject to the series of reasonable and prudent
caveats previously imposed by the Court.
So ordered this 29th day of February 2016.

S/Martin C. Carlson
Martin C. Carlson
United States Magistrate Judge

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