ROYAL MILE COMPANY, INC. et al v. UPMC et al

Filing 432

OPINION setting forth the reasons the amended report and recommendation no. 4 403 will be adopted in part and rejected in part. An appropriate order will be entered. Signed by Chief Judge Joy Flowers Conti on 9/20/16. (kjm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
COLE’S WEXFORD HOTEL, INC., on its
own behalf and on behalf of all others
similarly situated,
Plaintiffs,
v.
HIGHMARK INC.,
Defendant.

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Civil Action No. 10-1609

OPINION
CONTI, Chief District Judge
I.

Introduction

Pending before the court in this antitrust lawsuit are objections (ECF Nos. 407, 408) filed
by plaintiff Cole’s Wexford Hotel, Inc. (“Cole’s Wexford”) and defendant Highmark Inc.
(“Highmark”) to the special master’s amended report and recommendation no. 4 (ECF No. 403.).
Cole’s Wexford submitted a discovery dispute to the special master appointed in this case to
oversee discovery with respect to whether it may seek from defendant discovery concerning base
rates approved by the Pennsylvania Insurance Department (“PID”) and rates actually charged by
Highmark between 1999 and 2001, between 2008 and 2010, and after March 2012. The special
master—citing the filed rate doctrine—recommended that the court deny Cole’s Wexford’s
discovery requests because Cole’s Wexford did not satisfy its burden to show that the
information it seeks is relevant under Federal Rule of Civil Procedure 26. The court agrees with
the special master that Cole’s Wexford did not satisfy its burden to show that the information it
requests is relevant. The court will, therefore, adopt the amended report and recommendation no.

4 with respect to that portion of his recommendation, as supplemented by the court’s analysis set
forth in this opinion.
The court, however, will reject the portion of the amended report and recommendation
no. 4 which discussed the construction of the term “relevant” under the 2015 amendments to
Federal Rule of Civil Procedure 26. As discussed below, under Rule 26, the court and parties
have obligations to analyze the scope of discovery by considering whether the discovery sought
is relevant to a party’s claims or defenses and proportional to the needs of the case. FED. R. CIV.
P. 26(b)(1). Contrary to the analysis in the amended report and recommendation no. 4, discovery
requests are not relevant simply because there is a possibility that the information may be
relevant to the general subject matter of the action. (ECF No. 403 at 5.) As discussed in more
detail below, the special master reached the correct conclusion that Cole’s Wexford failed to
satisfy its burden under Rule 26 to show that its discovery request is relevant, but did not
properly construe the term “relevant” as contemplated by Rule 26. The special master considered
relevancy to be as broad as the subject matter, which is broader than the scope of discovery
contemplated by Rule 26.
II.

Procedural History and Background

On October 9, 2012, Cole’s Wexford, among other plaintiffs who were later dismissed
from this case, filed a second amended complaint against Highmark and then defendant UPMC.1
(ECF No. 90.) On September 27, 2013, after consideration of motions to dismiss filed by
Highmark and UPMC, the parties’ submissions related to those motions, and the oral argument
presented to the court at a hearing held on July 1, 2013, the court issued an opinion and order
1

On July 29, 2016, this court approved a settlement agreement between UPMC and Cole’s
Wexford. (ECF Nos. 414, 415.) UPMC is no longer a defendant in this case.
2

granting UPMC’s and Highmark’s motions to dismiss the second amended complaint. (ECF Nos.
240, 241.) The court held the second amended complaint must be dismissed because the measure
of damages set forth in the second amended complaint, i.e., the difference between the rates
Highmark charged the members of the putative class and the rates it would have charged
members of the class but for the alleged UPMC-Highmark conspiracy, implicated the filed rate
doctrine, and plaintiffs’ claim for tortious interference with existing and prospective contractual
relations was time barred. (ECF No. 240 at 1.) The second amended complaint was dismissed
without prejudice to plaintiffs seeking leave to file a third amended complaint “to the extent they
[were] able to plead, with respect to the antitrust claims, a measure of damages that does not
require the court to interfere with the ratemaking authority of the…[PID] and, with respect to the
tortious interference claim against UPMC, a basis for fraudulent concealment.” (Id. at 80.)
On October 28, 2013, plaintiffs filed a motion for leave to file a third amended complaint,
a brief in support of the motion, and the proposed third amended complaint attached to the
motion. (ECF No. 249.) On August 21, 2014, the court granted in part and denied in part the
motion for leave to file a third amended complaint. The court, among other things:
 denied the motion for leave with respect to the claims asserted by the individual plaintiffs
because the measure of damages asserted by those plaintiffs in the proposed third
amended complaint was barred by the filed rate doctrine;
 denied the motion for leave with respect to the claims asserted by the small group
plaintiffs based upon damages measured by the difference between rates the small group
plaintiffs paid to Highmark during the alleged UPMC-Highmark conspiracy and the rates
the small group plaintiffs would have paid beginning on March 21, 2012, to Highmark’s
competitors but for the UPMC-Highmark conspiracy because that measure of damages
was barred by the filed rate doctrine;
 granted plaintiffs leave to amend with respect to the small group plaintiffs’ claims based
upon damages measured by the difference between the rates Highmark charged the small
group plaintiffs during the alleged UPMC-Highmark conspiracy and the rates
Highmark’s excluded and marginalized competitors who were not subject to the PID’s
3

rate-filing requirements prior to March 21, 2012, would have charged the small group
plaintiffs prior to March 21, 2012, but for the UPMC-Highmark conspiracy;
 granted plaintiffs leave to amend with respect to the small group plaintiffs’ claims based
upon damages measured by the difference between the rates the small group plaintiffs
paid to Highmark’s subsidiary Highmark Health Insurance Company during the alleged
UPMC-Highmark conspiracy and prior to March 21, 2012, and the rates it would have
paid Highmark Health Insurance Company but for the UPMC-Highmark conspiracy;
(ECF No. 284); Royal Mile Co., Inc. v. UPMC and Highmark, 40 F.Supp.3d 552 (W.D. Pa.
2014).
On October 1, 2014, Cole’s Wexford filed a third amended complaint. (ECF No. 286.)
Cole’s Wexford in the third amended complaint alleges that Highmark and UPMC “conspired,
agreed, and acted in an organized, orchestrated, and deliberate fashion to control, divide, and/or
monopolize both the market for medical care and the market for health insurance,” which
“resulted in the exclusion of competing insurers from the market.” (Id. ¶ 1.) Cole’s Wexford
defined the class it seeks to represent in this case as “all persons, whether natural or fictitious,
who purchased small group health insurance coverage from, or otherwise paid any small group
plan premiums or portion thereof to, Highmark Health Insurance Co. [“HHIC”], or a similar forprofit subsidiary of Highmark Inc., between approximately July 1, 2010 and approximately
March 21, 2012.” (Id. ¶ 11.)
UPMC and Highmark filed motions to dismiss the third amended complaint. (ECF Nos.
288, 290.) On September 1, 2015, the court denied Highmark’s motion to dismiss the third
amended complaint and granted in part and denied in part UPMC’s motion to dismiss the third
amended complaint. (ECF Nos. 301, 302.) The court explained, among other things, that
“[u]nlike the proposed third amended complaint, the third amended complaint does not set forth
a measure of damages barred by the filed rate doctrine.” (ECF No. 302 at 39.)
4

In early 2016, Cole’s Wexford submitted to the special master its discovery dispute with
respect to base rates approved by the PID and rates actually charged by Highmark between 1999
and 2001, between 2008 and 2010, and after March 2012. On March 9, 2016, the special master
filed revised2 report and recommendation no. 4 with respect to that discovery dispute. (ECF No.
353.) On March 17, 2016, Highmark filed objections to revised report and recommendation no.
4. (ECF No. 359.) On March 31, 2016, Cole’s Wexford filed a response in opposition to
Highmark’s objections. (ECF No. 366.) On April 7, 2016, Highmark filed a reply brief. (ECF
No. 372.) The court after review of revised report and recommendation no. 4 and the
submissions by Cole’s Wexford and Highmark remanded the matter for the parties and special
master to conduct an analysis with respect to whether Cole’s Wexford’s discovery request
complied with Federal Rule of Civil Procedure 26, i.e., whether the information sought was
relevant and proportional to the case. The court set a briefing schedule for Cole’s Wexford to
renew its motion with respect to its discovery request with the special master and for the special
master to conduct a hearing about the dispute. (H.T. 5/23/16 (ECF No. 397).)
On June 24, 2016, the special master filed the amended report and recommendation no. 4.
(ECF No. 403.) In the amended report and recommendation no. 4, the special master, among
other things: (1) determined that the only discovery request properly before him was a request
for Highmark’s base rates and rates Highmark actually charged its customers for specific time
periods; (2) determined that under Rule 26 and pursuant to the filed rate doctrine, Cole’s
Wexford did not satisfy its burden to show that information was relevant to the subject matter of

2

The special master filed a revised report and recommendation no. 4 because the initial
report and recommendation no. 4 contained information the parties deemed confidential. The
special master filed revised report and recommendation no. 4 to omit the allegedly confidential
information.
5

the litigation; and (3) certain data sought but not specifically identified by Cole’s Wexford may
be relevant and proportional to this case. (ECF No. 403.)
On July 17, 2016, Cole’s Wexford and Highmark each filed objections to the amended
report and recommendation no. 4. (ECF Nos. 407, 408.) Cole’s Wexford attached to its
objections, among other things, the following: (1) a declaration of economist Jeffrey J. Leitzinger
(“Leitzinger”) (ECF No. 408-2 at 30-37); (2) a declaration of economist Einer R. Elhauge
(“Elhauge”) (id. at 50-57); and (3) a supplemental declaration of Leitzinger (ECF No. 408-4 at
2.) On July 29, 2016, Cole’s Wexford and Highmark filed responses in opposition to each other’s
objections to the amended report and recommendation no. 4. (ECF Nos. 416, 417.) On August
12, 2016, Cole’s Wexford filed a supplement to its objections. (ECF No. 420.) On August 15,
2016, Highmark filed a response to the supplement. (ECF No. 421.)
On August 16, 2016, the court held a hearing with respect to the objections made to the
amended report and recommendation no. 4. (H.T. 8/16/16 (ECF No. 423).) The court held on the
record that the only issue properly before the special master was “whether or not the Plaintiffs
would be able to obtain information concerning rates charged in certain periods by Highmark,”
which included the rates actually charged and the base rates approved by the PID from 1999
through 2001 and in 2014. (Id. at 3, 44.) In other words, the court held that Cole’s Wexford did
not properly, i.e., with the requisite specificity, place in issue its discovery requests for various
data underlying the rates Highmark charged to its customers during those years. (Id.)
With respect to Cole’s Wexford’s requests for the base rates approved by the PID and the
actual rates charged by Highmark from 1999 through 2001 and in 2014, the court acknowledged
that Highmark agreed to provide to Cole’s Wexford that information with respect to 2009 and
2013, the year before and year after the class period in this case. (Id.) The court expressed
6

serious reservations about whether the base rates and rates actually charged by Highmark from
1999 to 2001 and in 2014 were relevant in light of the filed rate doctrine and the evidence
submitted by Cole’s Wexford. (Id. at 35, 38, 43.) The court also explained that even if it found
that information to be relevant, it would need more information from Cole’s Wexford and
Highmark to assess whether Cole’s Wexford’s request was proportional to the case. (Id. at 4650.)
In response to the court’s concerns, counsel for Cole’s Wexford stated on the record:
Judge, I could go back to the experts and find out if we had some more
limited like average rates or something or whatever was filed, if that's even
sufficient. I can't speak to that because I haven't asked them that question. But I
am certainly willing to go back.
We don't want anything more than what we absolutely need. We are not
trying to overburden them. I tried to limit the periods and even reduce them even
further just so we have what we absolutely need. So I could go back and ask that
question.
And also perhaps -- I know that there are annual reports that sometimes
these companies do that have the average rates for a particular group or
something, and that might be sufficient too so they wouldn't have to give us every
change or every –
(H.T. 8/16/16 (ECF No. 423) at 50-51.) The court responded:
Why don't you find out that information. This goes to the relevancy -- this
goes to the proportionality and the burden because there is something to what
Highmark is saying, even assuming it's relevant, when you have to go back 17
years and you have to pull up all of this data and you have all of these people that
have to work on it. I do understand the need to control certain information,
although that warrants putting more of the burden on the party that doesn't want to
be open and let some other third party come in. But be that as it may, it is still a
significant factor for the Court to consider in terms of what the undertaking would
have to be here.
If there's something a lot more discrete that can be more readily
determined, it might make the issue easier to resolve. But if -- again, I am still
struggling with how you turn a regulated rate as the benchmark for a competitive
rate ten years, twelve years later, although I do understand we are looking at what
7

would be an unregulated rate in – an unregulated competitive rate in the time
frame that we're dealing with. So I do appreciate that.
…
What is the minimum really necessary that they would need without
having to go back and reconstruct old systems. Because even if I gave you
everything you wanted, you wouldn't see this for a long time. That doesn't serve
this case well since it's from 2010 and we need to get focused here –
…
-- on getting this case moving. I have got to weigh that too, the timing and
that type of thing. So I think that would be very helpful to know that answer at
this stage because I could go off on both issues here.
(Id. at 51-52.) The court permitted Cole’s Wexford to file a supplemental submission setting
forth a more discrete category of base rates and rates actually charged by Highmark and
permitted Highmark to respond to that supplemental submission with respect to the
proportionality of that request. (Id. at 52-53.)
On August 19, 2016, Cole’s Wexford filed a supplement to its objections. (ECF No. 422.)
Cole’s Wexford, however, did not identify in its supplement a more discrete category of either
base rates or rates actually charged by Highmark; rather, Cole’s Wexford set forth another
discovery request for information including and in addition to the base rates approved by the
PID. (Id.) In other words, Cole’s Wexford ignored the court’s holding that a request for data
underlying Highmark’s rates was not properly before the special master or the court and that
Cole’s Wexford should identify a more discrete category of rates that it wanted Highmark to
produce. On August 23, 2016, Highmark filed a response to Cole’s Wexford’s supplement
arguing, among other things, that Cole’s Wexford did not comply with the court’s directive set
forth on the record to identify a more discrete category of rates. (ECF No. 425.) Highmark
argued Cole’s Wexford’s supplement requested additional information, which Cole’s Wexford
did not show was relevant, and Highmark would “face substantial burdens to provide all of the
requested data.” (Id. at 5.) On August 29, 2016, Cole’s Wexford filed a reply to Highmark’s
8

response. (ECF No. 427.) Cole’s Wexford in the reply argued that its supplement answered the
court’s question about whether Cole’s Wexford’s “experts could base an economic model simply
upon publicly filed base rates.” (Id. at 2.) Cole’s Wexford asserted in its reply that the answer to
that question is “yes, but only if (1) Plaintiff’s experts have certain additional information for
both the pre-conspiracy period and the class period, and (2) Highmark calculated and used base
rates during the class period.” (Id.) Cole’s Wexford in its reply identified five categories of
information it is requesting from Highmark. (Id.)
III.

Standard of Review

The court reviews the special master's findings of fact and conclusions of law de novo.
FED. R. CIV. P. 53(f); (ECF No. 92 ¶ 18.) The court may adopt, modify, or reject wholly or in
part the report and recommendation. FED. R. CIV. P. 53(f).
IV.

Discussion

A. Scope of Discovery under the 2015 Amendment to the Federal Rule of Civil
Procedure 26
The Federal Rules of Civil Procedure were initially adopted in December 1937.
Prudential Ins. Co. of Am. v. U.S. Gympsum Co., 91 F.2d 1080, 1083 (3d Cir. 1993). Rule 26 at
that time addressed the taking of depositions. FED. R. CIV. P. 26 advisory committee’s note to
1937 adoption. The advisory committee notes to the 1937 adoption of Rule 26 recognized that
the “old chancery practice” of limiting discovery “to facts supporting the case of the party
seeking it,” was “largely abandoned by modern legislation.” Id.
Following the 1946 amendments to the rules, Rule 26 still concerned only the taking of
depositions. Rule 26 following the 1946 amendments made “clear the broad scope of
examination [at a deposition] and that it may cover not only evidence for use at the trial but also
9

inquiry into matters in themselves inadmissible as evidence but which will lead to the discovery
of such evidence.” FED. R. CIV. P. 26 advisory committee’s note to 1946 amendment. The
advisory committee notes to the 1946 amendment to Rule 26 explain: “The purpose of discovery
is to allow a broad search for facts, the names of witnesses, or any other matters which may aid a
party in the preparation or presentation of a case.” Id.
The 1970 amendment to Rule 26 broadened the scope of Rule 26 to include “all of the
discovery devices provided in the discovery rules.” FED. R. CIV. P. 26 advisory committee’s note
to 1970 amendment. Rule 26(b) was “recast to cover the scope of discovery generally” and
“regulate…any of the discovery devices” listed in the rule. Id. The Supreme Court in
Oppenheimer Fund Inc. v. Sanders, 437 U.S. 340, 351 (1978), discussed the scope of discovery
under the 1970 amendments to Rule 26(b)(1). That 1970 version of Rule 26(b)(1) provided:
“Parties may obtain discovery regarding any matter, not privileged, which is
relevant to the subject matter involved in the pending action, whether it
relates to the claim or defense of the party seeking discovery or to the claim or
defense of any other party, including the existence, description, nature, custody,
condition and location of any books, documents, or other tangible things and the
identity and location of persons having knowledge of any discoverable matter. It
is not ground for objection that the information sought will be inadmissible at the
trial if the information sought appears reasonably calculated to lead to the
discovery of admissible evidence.”
Oppenheimer, 437 U.S. at 351-52 (quoting FED. R. CIV. P. 26(b)(1) (1970)) (emphasis added).
The Supreme Court in Oppenheimer explained: “The key phrase in this definition—‘relevant to
the subject matter involved in the pending action’—has been construed broadly to encompass
any matter that bears on, or that reasonably could lead to other matter that could bear on, any
issue that is or may be in the case.” Oppenheimer, 437 U.S. at 351-52 (quoting FED. R. CIV. P.
26(b)(1) (1970) (current version at FED. R. CIV. P. 26(b)(1) (2015)).

10

The advisory committee in its notes to the 1980 amendment to Rule 26 acknowledged for
the first time that there was “widespread criticism of abuse of discovery” under that rule. FED. R.
CIV. P. 26 advisory committee’s note to 1980 amendment. The advisory committee considered a
change to the text of Rule 26 to combat the abuse of discovery, but determined that a textual
change was not necessary. Id. The advisory committee concluded that “abuse can best be
prevented by intervention by the court as soon as abuse is threatened.” Id. The 1980 amendment
to Rule 26 authorized and encouraged court intervention in discovery disputes when necessary.
Id.3

3

Rule 26(f) following the 1980 amendment provided:
(f) DISCOVERY CONFERENCE. At any time after commencement of an
action the court may direct the attorneys for the parties to appear before it for a
conference on the subject of discovery. The court shall do so upon motion by the
attorney for any party if the motion includes:
(1) A statement of the issues as they then appear;
(2) A proposed plan and schedule of discovery;
(3) Any limitations proposed to be placed on discovery;
(4) Any other proposed orders with respect to discovery; and
(5) A statement showing that the attorney making the motion has made a
reasonable effort to reach agreement with opposing attorneys on the
matters set forth in the motion. Each party and his attorney are under a
duty to participate in good faith in the framing of a discovery plan if a plan
is proposed by the attorney for any party. Notice of the motion shall be
served on all parties. Objections or additions to matters set forth in the
motion shall be served not later than 10 days after service of the motion.
Following the discovery conference, the court shall enter an order
tentatively identifying the issues for discovery purposes, establishing a plan and
schedule for discovery, setting limitations on discovery, if any; and determining
such other matters, including the allocation of expenses, as are necessary for the
11

The advisory committee notes to the 1983 amendment to Rule 26 further discussed the
abuse of discovery by litigants, which remained a concern of the advisory committee continuing
up to the 2015 amendment to Rule 26. FED. R. CIV. P. 26 advisory committee’s note to 1983
amendment. The advisory committee notes to the 1983 amendment provide:
Excessive discovery and evasion or resistance to reasonable discovery
requests pose significant problems. Recent studies have made some attempt to
determine the sources and extent of the difficulties.
…
The purpose of discovery is to provide a mechanism for making relevant
information available to the litigants. “Mutual knowledge of all the relevant facts
gathered by both parties is essential to proper litigation.” Hickman v. Taylor, 329
U.S. 495, 507 (1947). Thus the spirit of the rules is violated when advocates
attempt to use discovery tools as tactical weapons rather than to expose the facts
and illuminate the issues by overuse of discovery or unnecessary use of defensive
weapons or evasive responses. All of this results in excessively costly and timeconsuming activities that are disproportionate to the nature of the case, the
amount involved, or the issues or values at stake.
Given our adversary tradition and the current discovery rules, it is not
surprising that there are many opportunities, if not incentives, for attorneys to
engage in discovery that, although authorized by the broad, permissive terms of
the rules, nevertheless results in delay.…As a result, it has been said that the rules
have “not infrequently [been] exploited to the disadvantage of justice.” Herbert v.
Lando, 441 U.S. 153, 179 (1979) (Powell, J., concurring). These practices impose
costs on an already overburdened system and impede the fundamental goal of the
“just, speedy, and inexpensive determination of every action.” Fed.R.Civ.P. 1.

proper management of discovery in the action. An order may be altered or
amended whenever justice so requires.
Subject to the right of a party who properly moves for a discovery
conference to prompt convening of the conference, the court may combine the
discovery conference with a pretrial conference authorized by Rule 16.
FED. R. CIV. P. 26(f) (1980) (current version at FED. R. CIV. P. 26(b)(1) (2015)).
12

FED. R. CIV. P. 26 advisory committee’s note to 1983 amendment. The 1983 amendment4 to Rule
26(b)(1) added a paragraph to the rule. Id. The first sentence of the new paragraph was added to
“deal with the problem of over-discovery.” Id. The new paragraph, in its entirety, provided:
The frequency or extent of use of the discovery methods set forth in
subdivision (a) shall be limited by the court if it determines that: (i) the discovery
sought is unreasonably cumulative or duplicative, or is obtainable from some
other source that is more convenient, less burdensome, or less expensive; (ii) the
party seeking discovery has had ample opportunity by discovery in the action to
4

Rule 26(b)(1) following the 1983 amendment provided:
(b) Discovery Methods. Unless otherwise limited by order of the court in
accordance with these rules, the scope of discovery is as follows:
(1) In General. Parties may obtain discovery regarding any matter,
not privileged, which is relevant to the subject matter involved in the
pending action, whether it relates to the claim or defense of the party
seeking discovery or to the claim or defense of any other party, including
the existence, description, nature, custody condition and location of any
books, documents, or other tangible things and the identity and location of
persons having knowledge of any discoverable matter. It is not ground for
objection that the information sought will be inadmissible at the trial if the
information sought appears reasonably calculated to lead to the discovery
of admissible evidence.
The frequency or extent of use of the discovery methods set forth
in subdivision (a) shall be limited by the court if it determines that: (i) the
discovery sought is unreasonably cumulative or duplicative, or is
obtainable from some other source that is more convenient, less
burdensome, or less expensive; (ii) the party seeking discovery has had
ample opportunity by discovery in the action to obtain the information
sought; or (iii) the discovery is unduly burdensome or expensive, taking
into account the needs of the case, the amount in controversy, limitations
on the parties' resources, and the importance of the issues at stake in the
litigation. The court may act upon its own initiative after reasonable notice
or pursuant to a motion under subdivision (c).

FED. R. CIV. P. 26(b)(1) (1983) (current version at FED. R. CIV. P. 26(b)(1) (2015)).
13

obtain the information sought; or (iii) the discovery is unduly burdensome or
expensive, taking into account the needs of the case, the amount in controversy,
limitations on the parties' resources, and the importance of the issues at stake in
the litigation. The court may act upon its own initiative after reasonable notice or
pursuant to a motion under subdivision (c).
FED. R. CIV. P. 26(b)(1) (1983) (current version at FED. R. CIV. P. 26(b)(1) (2015)). The advisory
committee notes explain:
The objective is to guard against redundant or disproportionate discovery
by giving the court authority to reduce the amount of discovery that may be
directed to matters that are otherwise proper subjects of inquiry. The new
sentence is intended to encourage judges to be more aggressive in identifying and
discouraging discovery overuse. The grounds mentioned in the amended rule for
limiting discovery reflect the existing practice of many courts in issuing
protective orders under Rule 26(c).
FED. R. CIV. P. 26 advisory committee’s note to 1983 amendment.
The 1983 amendment to Rule 26(b) encouraged attorneys and the court to prevent abuse
in discovery. Id. For example, the advisory committee notes instruct attorneys to “be sensitive to
the comparative costs of different methods of securing information,” and “to think through their
discovery activities in advance so that full utilization is made of each deposition, document
request, or set of interrogatories.” Id. The 1983 amendment to Rule 26(b) also “contemplate[d]
greater judicial involvement in the discovery process.” Id. The 1983 amendment to Rule 26(b)
addressed the proportionality of discovery in consideration of the following factors: a case’s
nature and complexity, the importance of the issues at stake, the limitations of a financially weak
litigant, and the significance of the substantive issues. Id.
The 1993 amendments to the rules did not change the text of Rule 26(b)(1). The advisory
committee in its notes to the 1993 amendment, however, acknowledged “[t]he information
explosion of recent decades,” which “greatly increased both the potential cost of wide-ranging
14

discovery and the potential for discovery to be used as an instrument for delay or oppression.”
FED. R. CIV. P. 26 advisory committee’s note to 1993 amendment.
In 2000, the text of Rule 26(b)(1) was amended and provided:
(b) Discovery Scope and Limits.
(1) Scope in General. Unless otherwise limited by court order, the scope of
discovery is as follows: Parties may obtain discovery regarding any
nonprivileged matter that is relevant to any party's claim or defense-including the existence, description, nature, custody, condition, and location of
any documents or other tangible things and the identity and location of persons
who know of any discoverable matter. For good cause, the court may order
discovery of any matter relevant to the subject matter involved in the action.
Relevant information need not be admissible at the trial if the discovery appears
reasonably calculated to lead to the discovery of admissible evidence. All
discovery is subject to the limitations imposed by Rule 26(b)(2)(C).

FED. R. CIV. P. 26(b)(1) (2000) (current version at FED. R. CIV. P. 26(b)(1) (2015) (emphasis
added). The advisory committee notes to the 2000 amendment to Rule 26(b)(1) once again
reflect the advisory committee’s concerns about parties engaging in and courts permitting
overbroad discovery. Those notes provide, in relevant part:
Subdivision (b)(1). In 1978, the Committee published for comment a proposed
amendment, suggested by the Section of Litigation of the American Bar
Association, to refine the scope of discovery by deleting the “subject matter”
language. This proposal was withdrawn, and the Committee has since then made
other changes in the discovery rules to address concerns about overbroad
discovery. Concerns about costs and delay of discovery have persisted
nonetheless, and other bar groups have repeatedly renewed similar proposals for
amendment to this subdivision to delete the “subject matter” language. Nearly
one-third of the lawyers surveyed in 1997 by the Federal Judicial Center endorsed
narrowing the scope of discovery as a means of reducing litigation expense
without interfering with fair case resolutions. Discovery and Disclosure Practice,
supra, at 44-45 (1997). The Committee has heard that in some instances,
particularly cases involving large quantities of discovery, parties seek to justify
discovery requests that sweep far beyond the claims and defenses of the parties on
15

the ground that they nevertheless have a bearing on the “subject matter” involved
in the action.
The amendments proposed for subdivision (b)(1) include one element of these
earlier proposals but also differ from these proposals in significant ways. The
similarity is that the amendments describe the scope of party-controlled
discovery in terms of matter relevant to the claim or defense of any party.
The court, however, retains authority to order discovery of any matter
relevant to the subject matter involved in the action for good cause. The
amendment is designed to involve the court more actively in regulating the
breadth of sweeping or contentious discovery. The Committee has been informed
repeatedly by lawyers that involvement of the court in managing discovery is an
important method of controlling problems of inappropriately broad discovery.
Increasing the availability of judicial officers to resolve discovery disputes and
increasing court management of discovery were both strongly endorsed by the
attorneys surveyed by the Federal Judicial Center. See Discovery and Disclosure
Practice, supra, at 44. Under the amended provisions, if there is an objection that
discovery goes beyond material relevant to the parties' claims or defenses, the
court would become involved to determine whether the discovery is relevant to
the claims or defenses and, if not, whether good cause exists for authorizing it so
long as it is relevant to the subject matter of the action. The good-cause standard
warranting broader discovery is meant to be flexible.
…
The rule change signals to the court that it has the authority to confine discovery
to the claims and defenses asserted in the pleadings, and signals to the parties that
they have no entitlement to discovery to develop new claims or defenses that are
not already identified in the pleadings.
FED. R. CIV. P. 26(b)(1) advisory committee’s note to 2000 amendment.
The 2015 amendments to the Federal Rules of Civil Procedure became effective on
December 1, 2015. The current and amended version of Rule 26(b)(1), does not contain any
reference to the subject matter of the action. Amended Rule 26(b)(1) provides:
(b) Discovery Scope and Limits.
(1) Scope in General. Unless otherwise limited by court order, the scope of
discovery is as follows: Parties may obtain discovery regarding any
nonprivileged matter that is relevant to any party's claim or defense and
proportional to the needs of the case, considering the importance of the issues at
stake in the action, the amount in controversy, the parties' relative access to
16

relevant information, the parties' resources, the importance of the discovery in
resolving the issues, and whether the burden or expense of the proposed discovery
outweighs its likely benefit. Information within this scope of discovery need not
be admissible in evidence to be discoverable.
FED. R. CIV. P. 26(b)(1) (“amended Rule 26”) (emphasis added).
Despite the textual changes made to Rule 26(b)(1), the advisory committee notes explain
that the meaning and import of Rule 26(b)(1) remains the same, i.e., the court and parties have
obligations to analyze whether the discovery sought is relevant to a party’s claims or defenses
and proportional to the needs of the case.
The text of the amended rule following the 2015 amendment no longer provides that a
court, based upon good cause, may order discovery “of any matter relevant to the subject matter
involved in the action.” FED. R. CIV. P. 26(b)(1) (2000). The amended rule omits that sentence in
its entirety. The advisory committee notes accompanying the 2015 amendments explain, in
relevant part:
The amendment deletes the former provision authorizing the court, for
good cause, to order discovery of any matter relevant to the subject matter
involved in the action. The Committee has been informed that this language is
rarely invoked. Proportional discovery relevant to any party's claim or defense
suffices, given a proper understanding of what is relevant to a claim or defense.
The distinction between matter relevant to a claim or defense and matter relevant
to the subject matter was introduced in 2000. The 2000 Note offered three
examples of information that, suitably focused, would be relevant to the parties'
claims or defenses. The examples were “other incidents of the same type, or
involving the same product”; “information about organizational arrangements or
filing systems”; and “information that could be used to impeach a likely witness.”
Such discovery is not foreclosed by the amendments. Discovery that is relevant to
the parties' claims or defenses may also support amendment of the pleadings to
add a new claim or defense that affects the scope of discovery.
FED. R. CIV. P. 26(b)(1) advisory committee’s note to 2015 amendment.
The standing committee recognized that previous versions of Rule 26(b)(1) contained a
distinction between “party-controlled discovery” and “court-controlled discovery.” Committee
17

on Rules of Practice and Procedure of the Judicial Conference of the United States, Preliminary
Draft of Proposed Amendments to the Federal Rules of Bankruptcy and Civil Procedure –
Request

for

Comment

(2013),

available

http://www.regulations.gov/#!documentDetail;D=USC-RULES-CV-2013-0002-0001.

at
The

standing committee defined party-controlled discovery under the 2000 amendments to Rule
26(b)(1) to include “matter that is relevant to any party’s claim or defense,” while courtcontrolled discovery was limited to “any matter relevant to the subject matter involved in the
action.” Id. The standing committee acknowledged that its proposed 2015 amendments deleted
the sentence authorizing court-controlled discovery of any matter relevant to the subject matter
involved in the action, and, that under the proposed rule, “[d]iscovery should be limited to the
parties’ claims or defenses.” Id. at 265.
Following the 2015 amendments becoming effective, however, courts—as noted by the
special master in this case—continue to hold that discovery is relevant under 26(b)(1) if there is
“‘any possibility that the information may be relevant to the general subject matter of the
action.’” (ECF No. 403 (quoting Kegerise v. Susquehanna Twp. Sch. Dist., Civ. Action No. 140747, 2016 WL 2736048, at *1 (M.D. Pa. May 11, 2016).) This statement of the law prior to the
2015 amendment was—at best—incomplete, and, now, following the 2015 amendments is
erroneous. That interpretation of Rule 26(b)(1), furthermore, is contrary to the advisory
committee’s pervasive and continuing concerns about the abuse of discovery, which stem back to
the 1980 amendment to Rule 26.
Any holding—following the 2000 amendment to Rule 26(b)(1)—that the scope of
discovery was controlled by any matter relevant to the subject matter involved in the action was
erroneous because those holdings omitted the important distinction found in the text of the rule
18

between party-controlled discovery and court-controlled discovery. Following the 2000
amendments, party-controlled discovery was limited in scope by the claims or defenses in a case,
and court-controlled discovery was limited in scope by the subject matter of the litigation. The
2015 amendment to Rule 26(b)(1) “deleted the ‘subject matter involved in the action’ from the
scope of discovery,” i.e., deleted a court’s authority to order discovery of matter relevant to the
subject matter of a case. Now, under amended Rule 26, the scope of all discovery is limited to
matter that is relevant to the claims or defenses in the case and proportional to what is at stake in
a given case. In other words, the scope of discovery is limited to party-controlled discovery.
The special master in this case cited decisions in which the courts relied upon
Oppenheimer in support of a broad construction of the term “relevant,” i.e., referencing the
subject matter, with respect to amended Rule 26(b)(1). (ECF No. 403 (citing Green v. Cosby,
314 F.R.D. 164, 171 (E.D. Pa. 2016); Henry v. Morgan’s Hotel Grp., Inc., Civ. Action No. 151789, 2016 WL 303114, at *3 (S.D.N.Y. Jan. 25, 2016); State Farm Mut. Auto. Ins. Co. v.
Fayda, Civ. Action No. 14-9792, 2015 WL 7871037, at *2 (S.D.N.Y. Dec. 3, 2015).) The
reliance on Oppenheimer, however, is misplaced. The Supreme Court in Oppenheimer, did not
construe just the term “relevant;” rather, the Supreme Court construed the phrase “relevant to the
subject matter involved in the pending action,” which is a phrase that no longer appears in
amended Rule 26(b)(1). The Court’s definition of “relevant to the subject matter involved in the
pending action,” therefore, has no application to the text of amended Rule 26(b)(1), and it would
be inappropriate to continue to cite to Oppenheimer for the purpose of construing the scope of
discovery under amended Rule 26(b)(1). As set forth in the advisory committee notes to the 2015
amendments to Rule 26(b)(1) and the standing committee’s commentary with respect to its
proposed 2015 changes to Rule 26(b)(1), the scope of discovery is limited to matter that is
19

relevant to claims or defenses and is proportional to the needs of a case. For the foregoing
reasons, the court rejects the amended report and recommendation no. 4 with respect to the
special master’s statement that “‘[d]iscovery requests may be deemed relevant if there is any
possibility that the information may be relevant to the general subject matter of the action.’”
(ECF No. 403 (quoting Kegerise, 2016 WL 2736048, at *1.)5
B. Relevant to claims or defenses
1. The amended report and recommendation no. 4
The issue properly before the special master in the amended report and recommendation
no. 4 was whether Cole’s Wexford’s requests for Highmark to produce the base rates and actual
rates charged by Highmark from 1999 to 2001 and in 2014 were relevant and proportional to the
needs of this case. Cole’s Wexford attempted to show that the information was relevant through
the declarations of Leitzinger and Elhauge. Leitzinger in his declarations sets forth an
explanation of how he would use the rates from 1999 to 2001 to arrive at an overcharge
calculation in this case, i.e., a dollar amount that represents the difference between what HHIC
actually charged to Cole’s Wexford and what HHIC would have charged Cole’s Wexford but for
the alleged UPMC-Highmark conspiracy. Leitzinger explained:
Because the amount of overcharge depends on these situationally specific
circumstances, the primary focus in constructing the but for world, if possible,
is to find a period during which the same market participants were
competing in this same market environment free of the effects of the specific
anticompetitive behavior at issue. Once such a period is established the
corresponding prices provide an extremely useful benchmark for prices that
would have prevailed during the period associated with the antitrust violation but
for the anticompetitive behavior after appropriate adjustments are made.
5

The court notes, however, that the special master entitled the section of the amended
report and recommendation no. 4 in which he discusses the relevancy of the information
requested by Cole’s Wexford as “Bearing on Claims and Defenses / Limitations imposed by the
Filed Rate Doctrine.” (ECF No. 403 at 9.)
20

...
This is the role contemplated for the pricing information that has been
requested from January 1, 1999 to December 31, 2011, what I refer to as the
“earlier benchmark period.” Based on the allegations in the Third Amended
Complaint, the conspiracy alleged in this case began in 2002. Accordingly, the
three years from January 1, 1999 to December 31, 2001 provide a useful window
into the kind of market results that would have occurred but for the conspiracy
alleged in this case. With insurance premiums from that period in hand, there
would then be various ways using data both from that geographic market and
other competitors geographic markets)—including, simple extrapolations of the
premium levels, extrapolations including adjustments for increased costs or
changing demand, and/or econometric modeling—to predict premiums that would
have prevailed during the Class period but for the conspiracy (i.e., during the prior
from July 1, 2919 to March 21, 2012). Premium data from the earlier benchmark
period is uniquely valuable for this purpose because, based on the allegations in
the Complaint, there is no other period since then in which the alleged conspiracy
and anticompetitive conduct was not occurring or, as is explained in more detail
below, may not have acted in some fashion to influence the economic
environment.
(ECF No. 408-2 at 32 ¶¶ 8-9 (emphasis added).) Leitzinger explained he would use the base rates
and actual rates charged by Highmark in 2014 in relationship to the base rates and actual rates
charged by Highmark from 1999 to 2001, i.e., he would use the rates from 2014 to determine
how long it took for the effects of the alleged UPMC-Highmark conspiracy to dissipate, which
would enable him “to identify a trend over time towards lower premiums which (through
extrapolation) could then be used to identify premiums that would have prevailed had the
conspiracy never occurred in the first place.” (Id. ¶ 15.) Leitzinger further explained that he
would use the 2014 base rates and actual rates charged by Highmark to analyze “the extent to
which factors independent of the conspiracy or anticompetitive conduct may have caused prices
to change from 1999 to the present.” (Id. ¶ 16.)6

6

Leitzinger’s supplemental declaration provides, in pertinent part:
21

According to Elhauge’s declaration, Cole’s Wexford retained him to show that the
“issues of antitrust economics raised by the proposed class’s claims against Highmark can be
resolved on a classwide basis using methodologies and evidence that are common [to] the class.”
(ECF No. 408-2 at 52 ¶ 4.) Elauge’s declaration provides that the base rates and actual rates
charged by Highmark from 1999 through 2001 and in 2014 “can assist in understanding the
relevant markets before, during, and after the alleged conspiracy period without questioning the
appropriateness of the rates filed by Highmark with the Pennsylvania Insurance Department
during these times.” (ECF No. 408-2 at 53 ¶ 7.) Elhauge explained that the information can be
used to:
 show the degree of market power held by relevant market participants before,
during, and after the alleged conspiracy conduct (Id. ¶ 9);
 define the relevant antitrust market (Id. ¶ 10);
 determine “whether the actions undertaken by Highmark…would have been
in its rational self-interest if those actions had been undertaken standing alone,
separate from other components of the alleged conspiracy” ((Id. ¶ 11); and
 “determine the ways in which rivals’ abilities or incentives to compete were
altered by the alleged conspiracy conduct” (Id. ¶ 13.)
The special master reviewed the declarations of Leitzinger and Elhauge and considered
the proposed uses of the base rates and rates actually charged by Highmark from 1999 through
2001 and in 2014 to determine whether Cole’s Wexford met its burden to show that the

3. If you construct a model that identifies overcharges during the class period
of 2010-2012, does this necessarily mean that the model will identify
overcharges between 2002 and July 2010, and after March 2012?
4. No it does not. In order to determine whether or not there were overcharges
during those other periods one would have to apply the overcharge model to those
periods, accounting for other factors relevant to rates during those periods. That is
not an analysis I plan to undertake. Nor have I been asked by counsel to do so.
(ECF No. 408-4 ¶¶ 3-4.)
22

information requested is relevant. (ECF No. 403 at 10-12.) The special master determined that
each of the proposed uses proffered by Cole’s Wexford via the declarations of Leitzinger and
Elhauge required the court to “insert itself into the rate setting process,” which is forbidden by
the filed rate doctrine. (ECF No. 403 at 12.) The special master explained that the “proposed use
of the actual rates themselves is not likely to produce admissible evidence that will assist in
resolving the question of damages…[because] [i]f the Court were to admit damages evidence
which itself was constructed using a baseline established through the use of the filed rate
doctrine data, it would necessarily insert itself into the rate setting process.” (ECF No. 403 at 12.)
The special master concluded that under those circumstances the information requested
by Cole’s Wexford was not relevant because “such information is not likely to assist in resolving
the question of damages,” i.e., there is “no potential use for this data because any damage
calculation derived from it would itself be inadmissible.” (Id. at 14.) The special master noted
that with respect to Elhauge’s proposed uses of the base rates and rates actually charged by
Highmark, “[p]laintiff does not explain how these concepts are relevant to the damages claim
that is at issue in this matter.” (ECF No. 403 at 10 n.5.)
2. The filed rate doctrine
This court discussed in detail the filed rate doctrine in three of its previous opinions.
(ECF Nos., 240, 284, 301.) Because of the important implications the filed rate doctrine has on
the discovery dispute presently before the court, a further discussion of the doctrine is warranted
here.
The filed rate doctrine “‘bars antitrust suits based on rates that have been filed and
approved by federal agencies’” and state agencies. McCray v. Fidelity Nat’l Title Ins. Co., 682
F.3d 229, 236 (3d Cir. 2012) (quoting Utilimax.com, Inc. v. PPL Engery Plus, LLC, 378 F.3d
23

303, 306 (3d Cir. 2004)).
When the filed rate doctrine applies, it is rigid and unforgiving. Indeed,
some have argued that it is unjust. See, e.g., Fax Telecommunicaciones Inc. v. AT
& T, 138 F.3d 479, 491 (2d Cir.1998); Ting v. AT&T, 319 F.3d 1126, 1131 (9th
Cir.2003). It does not depend on “the culpability of the defendant's conduct or the
possibility of inequitable results,” nor is it affected by “the nature of the cause of
action the plaintiff seeks to bring.” Marcus v. AT&T Corp., 138 F.3d 46, 58 (2d
Cir.1998). It applies whenever a claim would implicate its underlying twin
principles of “preventing carriers from engaging in price discrimination as
between ratepayers” and “preserving the exclusive role of federal agencies in
approving rates.” Id.
Simon v. KeySpan Corp., 694 F.3d 196, 205 (2d Cir. 2012).7 The filed rate doctrine’s genesis is

7

The filed rate doctrine applies when a plaintiff’s claim implicates either of the doctrine’s
underlying principles of
(1) “preventing carriers from engaging in price discrimination as between
ratepayers,” and (2) “preserving the exclusive role of ... agencies in approving
rates ... by keeping courts out of the rate-making process,” a function that
“regulatory agencies are more competent to perform.”
McCray, 682 F.3d at 241 (quoting Marcus, 138 F.3d at 58-59). The first principle, known as the
“non-discrimination strand,” “recognizes that ‘victorious plaintiffs would wind up paying less
than non-suing ratepayers.’” McCray, 682 F.3d at 242 (quoting Wegoland Ltd. v. NYNEX
Corp., 27 F.3d 17, 21 (2d Cir. 1994)). The nondiscrimination strand is not implicated in this case
because Cole’s Wexford is suing Highmark on behalf of a putative class. McCray, 682 F.3d at
242. It is, therefore, “unlikely that a victory would allow [plaintiffs] to pay less than other
ratepayers.” McCray, 682 F.3d at 242.
The second principle is known as the “nonjusticiability strand” and recognizes:
“(1) legislatively appointed regulatory bodies have institutional competence to
address rate-making issues; (2) courts lack the competence to set ... rates; and (3)
the interference of courts in the rate-making process would subvert the authority
of rate-setting bodies and undermine the regulatory regime.” Sun City Taxpayers'
Assoc. v. Citizens Utils. Co., 45 F.3d 58, 62 (2d Cir.1995).
McCray, 682 F.3d at 242. A primary concern of the nonjusticiability strand is “preventing courts
from engaging in the ratemaking process.” McCray, 682 F.3d at 242. The court having to
calculate the legal rate but for the defendant’s antitrust violations “alone is enough to implicate
the nonjusticiability principle.” Id.; In re N.J. Title Ins. Litig., 683 F.3d at 457 (“[T]he
nonjusticiability strand recognizes that federal courts are ill-equipped to engage in the rate
making process, which does not depend on whether agencies actually use their superior
expertise.”).
24

found in Keogh v. Chicago & Northwestern Ry. Co., 260 U.S. 156 (1922), and its progeny.
In Keogh, the Court held a shipper could not maintain an antitrust lawsuit based upon
rates charged by railroad carriers who allegedly conspired together to fix freight transportation
rates because “every rate complained of had been duly filed by the several carriers with the
Interstate Commerce Commission.” Keogh, 260 U.S. at 160. The shipper argued that
competition was eliminated pursuant to the conspiracy, which caused the increase in his rates.
Id. at 161. The shipper sought damages measured by the difference between the rates charged
pursuant to the conspiracy and the rates charged prior to the conspiracy going into effect. Id. at
160. The Court dismissed the lawsuit identifying four reasons for its decision:


First, the Court reasoned that the rates charged to the shipper were determined by
the Interstate Commerce Commission to be “reasonable and nondiscriminatory,”
and it would be improper for the court to hold the carriers liable based upon
approved legal rates. Keogh, 260 U.S. at 162-63.



Second, the Court held that to permit the shipper to recover the difference
between the rate charged and a hypothetical lower rate would defeat the purpose
of Congress to prevent rate discrimination by “operat[ing] to give [the shipper] a
preference over his trade competitors.”8 Id. at 163.



Third, the Court found the shipper’s injury was based upon hypothesis. Id. at 163.
The Court explained:
The burden resting upon the plaintiff would not be satisfied by
proving that some carrier would, but for the illegal conspiracy,
have maintained a rate lower than that published. It would be
necessary for the plaintiff to prove, also, that the hypothetical
lower rate would have conformed to the requirements of the Act to
Regulate Commerce. For unless the lower rate was one which the
carrier could have maintained legally, the changing of it could not
conceivably give a cause of action. To be legal a rate must be
nondiscriminatory.

8

The Court rejected the argument that to avoid discriminatory rates all shippers injured
may sue to recover based upon the difference in rates. Keogh, 260 U.S. at 164. The Court
reasoned that it was “highly improbable” all courts and juries would provide each shipper “the
same measure of relief.” Id.
25

…
But it is the Commission which must determine whether a rate is
discriminatory; at least, in the first instance….But by no
conceivable proceeding could the question whether a hypothetical
lower rate would under conceivable conditions have been
discriminatory, be submitted to the Commission for determination.
And that hypothetical question is one with which plaintiff would
necessarily be confronted at a trial.
Id. at 164.


Fourth, the Court refused to award damages under those circumstances because
the alleged damages, based upon a hypothetical rate that should have been
charged, were “purely speculative.” Id. at 164. The Court explained:
[R]ecovery cannot be had unless it is shown, that, as a result of
defendants' acts, damages in some amount susceptible of
expression in figures resulted. These damages must be proved by
facts from which their existence is logically and legally inferable.
They cannot be supplied by conjecture.1 To make proof of such
facts would be impossible in the case before us. It is not like those
cases where a shipper recovers from the carrier the amount by
which its exaction exceeded the legal rate. Southern Pacific Co. v.
Darnell-Taenzar Co., 245 U. S. 531, 38 Sup. Ct. 186, 62 L. Ed.
451. Here the instrument by which the damage is alleged to have
been inflicted is the legal rate, which, while in effect, had to be
collected from all shippers. Exaction of this higher legal rate may
not have injured Keogh at all; for a lower rate might not have
benefited him. Every competitor was entitled to be put-and we
must presume would have been put-on a parity with him. And for
every article competing with excelsior and tow, like adjustment of
the rate must have been made. Under these circumstances no court
or jury could say that, if the rate had been lower, Keogh would
have enjoyed the difference between the rates or that any other
advantage would have accrued to him. The benefit might have
gone to his customers, or conceivably, to the ultimate consumer.
Id. at 164-65.

The Court, based upon the foregoing rationale, affirmed the decision of the Court of Appeals for
the Seventh Circuit dismissing the shipper’s claims against the carriers. Id. at 165.
The Court applied the principles set forth in Keogh in Square D Co. v. Niagara Frontier
26

Tariff Bureau, Inc., 476 U.S. 409 (1986). In Square D, a class of shippers sued motor carriers and
the ratemaking bureau for conspiring to fix rates for transporting freight. Square D, 476 U.S. at
412. The shippers requested treble damages measured by the difference between the rates they
paid and rates they would have paid “in a freely competitive market.” Id. at 413. The district
court relied on Keogh and dismissed the shippers’ claims for damages. Id. at 414. The court of
appeals affirmed the district court’s decision with respect to the filed rates. Id. The shippers
appealed to the Supreme Court of the United States. Id. at 410. The Supreme Court declined to
distinguish Keogh from the case before it based upon the rates that were charged to the shippers
not being “challenged in a formal ICC hearing before they were allowed to go into effect.” Id. at
417. The Court in Square D noted that the rates were “duly submitted, lawful rates under the
Interstate Commerce Act in the same sense that the rates filed in Keogh were lawful,” and the
shippers under those circumstances were precluded from maintaining “a treble-damages antitrust
action.” Id. at 418.
In In re Lower Lake Erie Iron Ore Antitrust Litigation, 998 F.2d 1144, 1159 (3d Cir.
1993), the Third Circuit Court of Appeals held the filed rate doctrine does not preclude claims
for damages based upon non-rate anticompetitive conduct. In that case, several groups of
plaintiffs sued railroad companies alleging the railroad companies conspired “to eliminate
competition and monopolize the transportation and handling of iron ore.” Id. at 1152. The
plaintiffs alleged:
Railroad officials orally agreed that leases of railroad docks or facilities
should be examined or modified to frustrate the efforts of non-railroad docks to
handle ore from self-unloaders. They also agreed to refuse to provide
competitively-priced inland rail service, i.e., to publish commodity line haul rates
for moving ore from such docks. Finally, it was agreed that railroad docks should
assess the same handling charges for unloading ore from bulkers as from selfunloaders, regardless of the extent of service performed.
27

…
To effectuate the goal of market preclusion, the railroads used coercion to
enforce adherence to the agreement to foreclose competition from private docks.
B & LE and its co-conspirators did indeed restrict the lease and sale of railroadowned dock property and boycotted non-railroad docks. These activities
eliminated much of the economic incentives to use self-unloaders. By impeding
the progress of the private dock system, the railroads were also effective in
foreclosing competition from trucks.
Id. at 1153. The issue before the court of appeals relevant to this case was whether the plaintiffs’
claims for treble damages based upon allegations that the railroads “conspired to preclude
competition in which ICC-approved rates played a role in thwarting market entry” were barred
under Keogh and Square D. Id. at 1158.
With respect to the steel company-plaintiffs, the district court in Lower Lake Erie
dismissed their claims for damages based upon rates filed by the railroads and “any damage
claims that would require estimating what rates the ICC would have accepted, an estimation
forbidden by Keogh.” Lower Lake Erie, 998 F.2d at 1158. The district court permitted two of the
steel company-plaintiffs’ claims against the railroads to proceed. Id. The district court described
those claims as follows:
“(1) [a claim] that [the steel companies] could have paid lower dock-handling
rates (sooner) to the private docks than they did to the railroad docks if the
railroads had not retarded the development of the self-unloader industry; and
(2) [a claim] that [the steel companies] could have paid lower land transport rates
(sooner) to the truckers, had the railroads not restrained competition by that
industry and monopolized linehauling from their docks.”
Lower Lake Erie, 998 F.2d at 1158 (quoting In re Lower Lake Erie Iron Ore Antitrust Litig., 759
F.Supp. 219, 234 (E.D. Pa. 1991)). The district court reasoned that with respect to those claims,
the “plaintiffs' damages [did] not depend on proof of price-fixing by defendants, which Keogh
would bar, but on proof that defendants conspired to exclude low cost competitors from the
28

market, which does not implicate the ICC's exclusive jurisdiction and therefore is not barred by
Keogh.” Lower Lake Erie, 998 F.2d at 1158 (emphasis added). The district court also determined
that one of the plaintiffs’ “claims for damages emanating from the delay in the construction and
use of [its] own dock facilities” was not barred under Keogh. Id. at 1159. The district court noted
that to bar such a claim “would overextend Keogh's reach and could produce a rule that one who
pays for services governed by ICC tariffs is foreclosed from asserting that antitrust violations
prevented use of a less expensive, equivalent service.” Id.
The Court of Appeals for the Third Circuit affirmed the decision of the district court with
respect to the steel company-plaintiffs holding “the district court correctly characterized [the
railroads’] anti-competitive activity as market preclusion, and Keogh's protective rule cannot
apply to forbid recovery for the resulting economic detriment.” Lower Lake Erie, 998 F.2d at
1159. The court of appeals held:
As the Supreme Court has succinctly stated, Keogh merely prevents
private shippers from sustaining an award of treble damages by claiming that
ICC-approved rates were the product of an antitrust violation. Square D, 476 U.S.
at 422, 106 S.Ct. at 1929. That statement of Keogh's protection does not preclude
liability based on non-rate anticompetitive activity. Indeed, the steel companies'
case involves damage claims based on non-rate activity that targeted potential
low-cost competitors.
Lower Lake Erie, 998 F.2d at 1159 (emphasis added). The court acknowledged “that the success
of anticompetitive non-rate activity would coincidentally implicate rates,” but noted the rates
charged by the railroad in that case were “ancillary” to the steel company-plaintiffs’ claims. Id.
The court instructed:
It is fully consistent with Keogh…to accept these rates as lawful and
nonetheless to conclude that through non-rate activities, particularly the restriction
on the sale or lease of dock space and the refusal to deal with potential
competitors, the railroads effectively retarded entry of lower cost competitors to
the market. The instrument of damage to the steel companies was the absence of
29

the lower-cost combination. In contrast, the Supreme Court in Keogh made it
clear that “the instrument by which Keogh is alleged to have been damaged is
rates approved by the Commission.” 260 U.S. at 161, 43 S.Ct. at 49.
Lower Lake Erie, 998 F.2d at 1159. The court stressed that the plaintiffs in Lower Lake Erie met
their burden by showing “the railroads conspired to protect their stronghold in the ore transport
market by blocking entry by low-cost competitors, not that the railroads charged an unlawful
rate.” Id. This was in contrast to the shipper’s burden in Keogh—which the Court found the
shipper could not meet—to prove that but for the conspiracy a carrier would have charged him a
lower rate and the lower rate would have been approved by the ICC. Id.
The measure of damages in Lower Lake Erie was the difference between the approved
rates charged by the railroads to the steel company-plaintiffs and the lower rates the steel
company-plaintiffs could have paid to the railroads’ lower-cost competitors, i.e., the privately
owned docks and trucking companies whose rates were not subject to approval by a
governmental agency. To calculate damages in Lower Lake Erie the court compared legally
approved rates charged by the railroads with rates charged by unregulated docks and trucking
companies. Under those circumstances, the steel company-plaintiffs were not required to prove
what regulated entities would have charged but for the railroads’ anticompetitive conduct and
that the ICC would have approved those hypothetical rates. The court, therefore, was not
required to engage in the ratemaking process, and the steel company-plaintiffs could sustain their
burden of proving lower-cost options that were precluded by the railroads’ anticompetitive
conduct.
In Goldwasser v. Ameritech Corp., Civ. No. 97-6788, 1998 WL 60878 (N.D. Ill. Feb. 4,
1998), the plaintiffs alleged the defendant telephone service company, which controlled more
than ninety percent of the relevant markets, “effectively fenced-out competitors from the local
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telephone service market, thus preserving [the defendant’s] monopoly power and its ability to
extract supracompetitive prices from consumers.” Goldwasser, 1998 WL 60878, at *5. The
defendant argued, among other things, that the plaintiffs’ claims were barred under Keogh
because “no matter what the underlying conduct that [the plaintiffs] complain of, [the plaintiffs]
are merely seeking recovery for [the defendant’s] overcharge for local telephone services.” Id. at
*4. The plaintiffs cited to Lower Lake Erie and argued the filed rate doctrine did not bar their
claims because they were based upon the defendant’s non-rate anticompetitive activity. Id. at *5.
The court rejected the plaintiffs’ argument finding that rate making was implicated for the
competitors and Lower Lake Erie was distinguishable on that basis. The court explained:
In Lower Lake Erie, the alleged anticompetitive activity sought to exclude
an entirely new alternative means of competition—shipping by truck instead of
rail—which would have otherwise been available to the consumer steel company
plaintiffs. The court explained that “the question of hypothetical lower rates [was]
ancillary” since the excluded trucking competitors would not have been subjected
to the same rate-setting regulatory review. Id. at 1160. Thus, the filed rates of the
railroads were only relevant to the extent that consumers were constrained to pay
them for lack of any other options.
In stark contrast, the competitors allegedly excluded in this case are
telephone companies, just like Ameritech, that are governed by the same ratefiling requirements in that industry. Unlike the steel companies in Lower Lake
Erie, consumers in the local telephone market are captive to rates approved by the
state PUCS. Any measure of damages in this case would necessarily involve
the Court's determination of a hypothetical lower rate that would have been
approved by the various state PUCs—exactly the messy task which the filed
rate doctrine seeks to avert. Thus, since filed rates are necessarily implicated by
Plaintiffs' claims, the distinction drawn by Lower Lake Erie is not relevant to the
case at bar. See County of Stanislaus v. Pacific Gas & Elec. Co., 114 F.3d 858,
865 (9th Cir.1997) (similarly finding Lower Lake Erie 's distinction irrelevant
where filed rates are unavoidable).
Id. at *5-6 (emphasis added).
3. Leitzinger’s declaration
Cole’s Wexford requests from Highmark the base rates approved by the PID and the
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actual rates charged by Highmark from 1999 through 2001 and in 2014. Under Rule 26, Cole’s
Wexford must show how that information is relevant to its claims and defenses in this case.
(ECF No. 403 at 6-7 (citing FED. R. CIV. P. 26(b)(1) advisory committee’s note to 2015
amendment; Hon. Elizabeth D. Laporte & Jonathan M. Redgrave, A Practical Guide to
Achieving Proportionality Under New Federal Rule of Civil Procedure 26, 9 FED. CTS. L. REV.
19, 40 (2015); and Floyd v. Olshefski, Civ. Action No. 13-578, 2016 WL 738819, at *1 (M.D.
Pa. Feb. 22, 2016) (“The moving party must demonstrate the relevance of the information sought
to a particular claim or defense.”).) Cole’s Wexford attempted to show that the information it
requests from Highmark is relevant to its claims for damages via the declaration of Leitzinger.
As described above, Leitzinger’s declaration provides that he will use the rates actually charged
by Highmark, which were filed rates, as a benchmark to show what HHIC would have charged
Cole’s Wexford but for the alleged UPMC-Highmark conspiracy.
One treatise explains the benchmark or yardstick method of calculating damages for a
case based upon an overcharge theory as follows:
The yardstick method of estimating damages was approved by the
Supreme Court in 1946, in Bigelow v. RKO Radio Pictures, Inc. Under the
yardstick method the plaintiff identifies some geographic market that is as similar
as possible to the the cartelized market, but for the conspiracy. Obviously, the
yardstick method has certain inherent limitations.
…
The ideal conspiracy for the yardstick approach is a local cartel where a
nearby market can be found which has the same basic cost structure. Adjustments
must probably be made for differences in taxes and regulatory fees, costs of
transportation, and different wage and salary rates. However, if these differences
can be isolated and quantified, an expert economist or accountant should be able
to produce a “reconstructed” price that would have prevailed in the cartelized
market if it had the same level of competition as exists in the yardstick market.
A good illustration of the method in practice is Greenhaw v. Lubbock
County Beverage Ass’n, which involved a price fixing conspiracy among liquor
retailers in Lubbock County, Texas. In estimating damages the plaintiff’s expert
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compared prices in Lubbock County during the conspiracy period with those that
prevailed in Dallas, which was presumably competitive. First, the expert
developed a ratio that reflected cost differentials between the two markets, and
from this ratio calculated what were described as “should have been” prices for
the defendants’ products during the conspiracy years. From these prices the expert
was then able to estimate that the cartel overcharged purchases by about 7.74%.
This percentage of the defendants’ total sales during the conspiracy period
equaled the aggregate monopoly overcharge.
HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY, THE LAW

OF

COMPETITION

AND ITS

PRACTICE 894-95 (5th ed. 2016).
Here, Leitzinger in his declaration describes how he would use the actual regulated rates
charged by Highmark to show the damages to Cole’s Wexford in this case as follows:
Because the amount of overcharge depends on these situationally specific
circumstances, the primary focus in constructing the but for world, if possible, is
to find a period in time during which the same market participants were
competing in this same market environment free of the effects of the specific
anticompetitive behavior at issue. One such a period is established the
corresponding prices provide an extremely useful benchmark for prices that
would have prevailed during the period associated with the antitrust violation but
for the anticompetitive behavior after appropriate adjustments are made.
(ECF No. 408-2 at 32 ¶ 8.) Leitzinger’s declaration is insufficient to prove that the regulated
rates charged by Highmark from 1999 through 2001 are relevant in this case. Leitzinger declares
that his benchmark methodology is based upon “find[ing] a period in time during which the
same market participants were competing in this same market environment free of the effects
of the specific anticompetitive behavior at issue.” (Id. (emphasis added).)
According to Cole’s Wexford’s allegations in the third amended complaint, however,
HHIC, the nonregulated entity, did not compete in the relevant market from 1999 through 2001,
which is the timeframe in which Leitzinger wants to derive his benchmark. There are no
allegations or evidence that any nonregulated entities were competing in the relevant market
from 1999 through 2001. Leitzinger’s declaration, therefore, does not show that Highmark’s
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regulated rates charged from 1999 through 2001 are relevant because 1999 through 2001 does
not represent a period of time during which the same market participants that were competing in
the same market environment free from the effects of anticompetitive behavior. In other words,
Leitzinger in his declaration explains how rates charged during a period of time in which the
same market participants were competing in the same market environment free of the effects of
the anticompetitive behavior alleged in a case are relevant, but Cole’s Wexford did not request
from Highmark rates it charged during a period of time in which the same market participants
were competing in the same market environment free of the effects of the anticompetitive
behavior alleged in this case.
Even if Leitzinger’s declaration was sufficient for the court to consider that the same
market participants and environment existed during the class period and the 1999 through 2001
timeframe, Cole’s Wexford still did not satisfy its burden to show that the requested regulated
rate information is relevant to the claims or defenses in this case. Cole’s Wexford did not present
to the court any information about how Highmark’s regulated rates during the 1999 through 2001
timeframe could be utilized that does not run afoul of the filed rate doctrine. The rates Highmark
charged during the 1999 through 2001 timeframe were required to comply with the PID’s ratefiling requirements and be approved by the PID as lawful rates. For the court to separate out the
effects of the PID’s rate-filing requirements to determine a competitive, nonregulated rate for the
class period would necessitate the court to assess the rate-making of the PID, which runs afoul of
the filed rate doctrine.
If the effects of the rate-filing requirements were not separated out from Highmark’s
regulated rates, this court’s acceptance of Cole’s Wexford’s calculations based upon Highmark’s
regulated rates would in effect require the court to assess would have been a regulated rate
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during the class period. That assessment would impugn the ratemaking authority of the PID and
in effect involve the court in ratemaking. The court is not convinced that Cole’s Wexford can
utilize Highmark’s regulated rates charged from 1999 through 2001 in a calculation to determine
rates that would have been charged during the class period and avoid the implications of the filed
rate doctrine by assigning the results of that calculation to a nonregulated entity, i.e., HHIC. For
the foregoing reasons, Cole’s Wexford failed to show via the declaration of Leitzinger that the
regulated rates charged by Highmark from 1999 through 2001 are relevant in this case.
With respect to the actual regulated rates charged by Highmark in 2014, Leitzinger
declares that those rates are relevant in relation to the actual regulated rates charged by
Highmark from 1999 through 2001. Because Cole’s Wexford did not satisfy its burden to show
that the actual regulated rates charged by Highmark from 1999 through 2001 are relevant, the
court cannot discern how the actual rates charged by Highmark in 2014 are relevant to Cole’s
Wexford’s claims or defenses in this case.
With respect to the base rates approved for Highmark by the PID from 1999 through
2001 and in 2014, Cole’s Wexford in its latest submission to the court conceded that information
is relevant “only if (1) Plaintiff’s experts have certain additional information for both the preconspiracy period and the class period, and (2) Highmark calculated and used base rates during
the class period.” (ECF No. 427 at 1.)9 As the court explained on the record during the August
16, 2016, the discovery request properly before the special master and in issue in the amended
report and recommendation no. 4 is Cole’s Wexford’s request for the actual rates charged by

9

If Cole’s Wexford finds in discovery that HHIC used base rates calculated by the same
method used by Highmark to establish the prior regulated rates, there may be a basis to
reconsider this issue.
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Highmark and the base rates from 1999 through 2001 and in 2014. Cole’s Wexford, therefore,
failed to show that the base rates—separate and apart from the actual rates charged during those
timeframes—are relevant to its claims or defenses in this case.
4. Elhauge’s declaration
Cole’s Wexford attempted to show the actual rates charged by Highmark and the base
rates approved by the PID from 1999 through 2001 are relevant via the declaration of Elhauge.
Elhauge declared that the information sought by Cole’s Wexford “can assist in understanding the
relevant markets before, during, and after the alleged conspiracy period.” (ECF No. 408-2 at 53 ¶
7.) As the special master concluded, however, Elhauge’s declaration is conclusory and Cole’s
Wexford does not “strenuously advance[]” his position to prove that the information it requests
from Highmark is relevant in this case. (ECF No. 403 at 10 n.5.) Cole’s Wexford does not
sufficiently explain how regulated rates that are not subject to commentary by this court and are
presumed to be reasonable, can aide Elhauge’s analysis. Cole’s Wexford did not, therefore,
satisfy its burden to show that the information it requests from Highmark is relevant based upon
Elhauge’s declaration.
C. Proportionality
Having determined that Cole’s Wexford did not satisfy its burden to show that the
information it requests from Highmark is relevant, the court is not required to analyze whether
that request is proportional to this case. Even if this court found the information is relevant, the
court has serious concerns about whether Cole’s Wexford’s request is proportional to this case.
The special master did not address the proportionality of the discovery request before him.
V.

Conclusion

Subject to the foregoing analysis, the court will adopt the special master’s amended
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report and recommendation no. 4 to the extent it recommended that the court deny Cole’s
Wexford’s discovery request for actual rates charged by Highmark and base rates approved by
the PID from 1999 through 2001 and in 2014 because Cole’s Wexford failed to satisfy its burden
to show that information is relevant to its claims and defenses. The court rejects the part of the
amended report and recommendation concerning the construction of the term “relevant.” The
court—as set forth on the record at the hearing held on August 16, 2016—will not adopt any
portion of the report and recommendation that addresses discovery requests that were not
properly before the special master. The denial of Cole’s Wexford’s discovery request is without
prejudice to Cole’s Wexford submitting to Highmark, and, if a dispute arises, to the special
master, a specific discovery request about exactly the non-rate information it is seeking from
Highmark. Accordingly, the objections (ECF No. 407) filed by Highmark to the amended report
and recommendation no. 4 will be sustained, and the objections (ECF No. 408) to the amended
report and recommendation no. 4 filed by Cole’s Wexford will be denied.
Within fourteen days of the entry of this opinion and accompanying order, Cole’s
Wexford and Highmark must meet and confer with the special master to develop a revised
discovery plan to address the close of phase I of discovery in this case, and, if there are disputes
about discovery, whether Cole’s Wexford intends to submit another discovery dispute to the
special master.
Within twenty-one days of the entry of this opinion and accompanying order, Cole’s
Wexford and Highmark shall file with the court the revised discovery plan apprising the court of
the procedure to be undertaken to address any remaining discovery disputes and the pertinent
dates for the close of phase I discovery.
An appropriate order will be entered.
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BY THE COURT,
Dated: September 20, 2016

/s/ JOY FLOWERS CONTI
Joy Flowers Conti
Chief United States District Judge

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