UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
| ______________________________________ |
| | ) | | |
UNITED STATES OF AMERICA, | ) | | | | ) | | |
Plaintiff,
| ) | Civil Action No. 99-005(MMS)
| | | ) | | |
vs. | ) | | | | ) | | | DENTSPLY
INTERNATIONAL, INC., | ) | | | | ) | | |
Defendant.
| ) | | | ______________________________________ | ) | |
UNITED STATES' BRIEF IN SUPPORT
OF ITS MOTION
FOR ENTRY OF ITS PROPOSED PROTECTIVE ORDER
AND IN RESPONSE TO THE MOTION
OF
HENRY SCHEIN,
INC. TO INTERVENE FOR THE
SOLE PURPOSE OF SECURING ENTRY
OF
A PROTECTIVE ORDER
Dated: March 18, 1999
COUNSEL FOR PLAINTIFF
UNITED STATES OF AMERICA
CARL SCHNEE
UNITED STATES ATTORNEY
Judith M. Kinney (DSB #3643)
Assistant United States Attorney
1201 Market Street, Suite 1100
Wilmington, DE 19801
(302) 573-6277
Mark J. Botti
William E. Berlin
Michael S. Spector
Michael D. Farber
United States Department of Justice
Antitrust Division
325 Seventh Street, N.W., Suite 400
Washington, DC 20530
TABLE OF CONTENTS
Page
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
TABLE OF
AUTHORITIES.................................................................................................ii
I. STATEMENT OF THE
NATURE AND STAGE OF THE PROCEEDING........1
II. SUMMARY OF
ARGUMENT.................................................................................3
III. STATEMENT OF
FACTS........................................................................................6
IV. ARGUMENT...........................................................................................
.............. ....7
A. Economic Injury Is Likely to Result from
Dentsply's In-House
Business Counsel's Review of
Nonparties' Confidential Information.........9
B. Denial of
Access to Dentsply's In-House Counsel Will Facilitate the
Full Disclosure of Relevant Information by
Nonparties.............................13
B. Nondisclosure to Defendant's In-House
Counsel Will Have No
Effect on Defendant's Ability to Defend
This Case...................................15
C. The Goals of Protecting Against
Economic Injury and of Facilitating
Discovery Could Also Be Served By the
Restrictions on Defendant's
Outside Counsel Similar to Those That
Henry Schein Has Proposed.......17
CONCLUSION...................................................................................................................
.19
Page ii.
TABLE OF
AUTHORITIES
Page
Cases:
Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance Co., 784 F.2d 1325
(7th Cir.
1986)....................................................................................................10,17
Boehringer Ingenlhieim Pharmaceuticals, Inc. v. Hercon Labs, Corp.,
1990 WL 160666 (D. Del.
1990)......................................................................13,18
Carpenter Tech. Corp. v. Armco, Inc., 132 F.R.D. 24 (E.D. Pa.
1990).........................13
Cipollone v. Liggett Group, Inc., 785 F.2d 1108 (3d Cir.
1986).......................................8
In re Coordinated Pretrial Proceeding in Petroleum Products Antitrust
Litigation,
906 F.2d 432 (9th Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Greater Rockford Energy and Technology Corp v. Shell Oil Co., 138 F.R.D.
530
(C.D. Ill.
1991)........................................................................................................14
Leucadia, Inc. v. Applied Extrusion Technologies, 998 F.2d 157 (3d Cir.
1993).............7
Pansy v. Borough of Stroudsburg, 23 F.3d 772 (3d Cir.
1994).......................................2,8
Phillips Petroleum Co. v. Rexene Products Co, 158 F.R.D. 43 (D. Del. 1994). . . . .
12
Safe Flight Instrument Corp. v. Sundstrand Data Control, Inc., 682 F. Supp.
20
(D. Del.
1988)............................................................................................8,11,12,15
Standard Chlorine of Delaware, Inc. v. Sinibaldi, 821 F. Supp. 232 (D. Del.
1992)........8
United States v. Citicorp, CA No. 98-436JJF (D. Del. Oct. 21,
1998)............................17
United States v. International Business Machines, Corp., 72 Civ. 344
(S.D.N.Y. April 10, 1996)
.......................................................................................8
United States v. International Business Machines, Corp., 62 F.R.D. 526
(S.D.N.Y.
1974)...............................................................................................passim
United States v. Lockheed Martin, 1998 WL 306755 (D.D.C. May 29,
1998)...............16
United States v. Long Island Jewish Medical Center, CV 97-3412
(E.D.N.Y. July 18,
1997).......................................................................................17
United States v. Visa, U.S.A., Inc., 98 Civ. 7076 (BSJ)
(S.D.N.Y. Dec. 11,
1998)......................................................................................17
United States v. United States Gypsum Co., 422 U.S. 422 (1978) . . . . . . . . . .
. . . 9
United States Steel Corp. v. United States, 730 F.2d 1465 (Fed. Cir.
1984)...................13
Statutes and Rules:
Clayton Act, § 3
.................................................................................................................. 1
D. Del. LR
26.2........................................................................................................... 2,3,14
Federal Rules of Civil Procedure:
Rule
24(b)...................................................................................................................2
Rule
26(c)(7)...........................................................................................................7,8
Sherman Act, §§
1-2............................................................................................................. 1
.
Page 1...
I. STATEMENT OF THE NATURE AND STAGE
OF THE PROCEEDING
On January 5, 1999, the United States filed its complaint (D.I. 1)
against
Defendant, Dentsply International, Inc., seeking equitable and other relief for
Defendant's continuing violations of Section 2 of the Sherman Act, Section 3 of
the
Clayton Act and Section 1 of the Sherman Act. The Complaint alleges that
Defendant
has engaged, and continues to engage, in a variety of actions that unlawfully maintain
its
monopoly power and deny competing manufacturers of artificial teeth access to
independent distributors. On February 11, 1999, Defendant filed an amended
answer
(D.I. 11).
In
February 1999, the United States and Defendant discussed a proposed
stipulated protective order that was based on previous protective orders to which
the
Antitrust Division and other defendants have stipulated. The proposed stipulated
protective order would have established protection for highly confidential
information,
that is, information, that, if disclosed, would result in a clearly defined and serious
injury. On February 11, 1999, Defendant returned a redlined version of the
proposed
stipulated protective order. Ultimately, after a number of discussions and
revisions,
Defendant identified only one issue that divided the parties: Defendant demanded
the
right to disclose nonparty confidential information to an in-house business attorney,
Mr.
Brian Addison, who is Defendant's Vice President, Secretary and General Counsel.
Orally and by letter dated March 3, 1999, the United States offered to
stipulate to
the majority of the terms of a protective order but allowing each party to reserve
the
Page 2...
right to litigate the issue of in-house counsel's access to confidential information, or
any
other issue on which the parties could not reach agreement.1 Defendant refused
this
proposal.
On March 4, 1999, after discussions with both parties, Henry Schein,
Inc., a
nonparty interested in preserving the confidentiality of certain of its information, filed
its
Motion to Intervene for the Sole Purpose of Securing Entry of a Protective
Order
("Motion to Intervene") (D.I. 19) and a Memorandum of Law in Support of the
Motion
(D.I. 20).2
The protective order proposed by Henry Schein ("Schein Protective Order")
mirrors in nearly all material respects the protective order now proposed by the
United
States. The Schein Protective Order, however, includes a limitation on the
future
representation of Defendant by outside counsel who receive access to
nonparty
confidential information. That additional protection creates a potential conflict
between
the protection that Henry Schein seeks for its confidential information and the
interim
protection afforded by D. Del. LR 26.2.
On March 5, 1999, Defendant delivered to the Court a letter stating its
opposition
to Henry Schein's Motion to Intervene and the provisions in the Schein Protective
Order
that would impose limitations on outside counsel. Defendant argued, among
other
Page 3..
things, that there "is no authority supporting" the relief requested by Henry Schein
and
that there was no factual basis for the relief because "Dentsply's outside counsel
does not
advise Dentsply on competitive business decisions."
At the status conference on March 8, 1999, the Court established the
terms under
which the United States could produce documents to Defendant pursuant to D. Del.
LR
26.2 during the pendency of Henry Schein's Motion. Accordingly, on March 9,
1999,
the United States produced to Defendant, pursuant to D. Del. LR 26.2,
documents
produced by nonparties to this matter that might contain confidential
information.
The United States now moves for entry of its proposed protective
order ("the
United States' Protective Order") and files this brief in support of that Motion and
in
response to the Motion of Henry Schein. The United States' Protective Order is, in
most
respects, identical to the last version of a protective order that was sent to
Defendant, as
to which Defendant objected on the ground just described.3 This Brief sets forth
the
arguments for not permitting disclosure to Defendant's inside, business counsel
and
discusses non-party Henry Schein's proposal to limit the future representation
of
Page 4
Defendant by Defendant's outside counsel in this action.
II. SUMMARY OF
ARGUMENT
The United States' Protective Order appropriately limits pretrial
disclosure of
information that a producing party or nonparty to this case designates as
confidential,
that is, information which, if disclosed, "would result in a clearly defined and
serious
injury." It affords Defendant's outside counsel, counsel for the United States,
and
testifying and consulting experts full access to confidential information and
establishes a
procedure for disclosure of confidential information to potential and actual trial
witnesses. Nonparty discovery in this matter, as has discovery in other civil
antitrust
enforcement actions, will likely involve the most sensitive business information
of
Defendant's competitors and customers.
Disclosure of such information to Defendant will, by definition and by
necessity,
cause economic harm. Defendant would gain an unfair advantage over its
competitors
and customers through access to this information. Moreover, allowing Defendant's
in-
house business counsel to have access to confidential information will likely cause
the
very harm to nonparties that a protective order is intended to prevent. The United
States
is not questioning the good faith of Defendant's in-house counsel. Rather, the
concern
arises from the risk "of inadvertant disclosure. House counsel are employed
full-time to
advance the interests of their employer. They regularly meet with personnel of
the
corporation on day-to-day matters, wholly apart from this litigation." United
States v.
International Business Machines, Corp., 72 Civ. 344, 3 (S.D.N.Y. April 10,
1996)
("IBM") (Appendix A-3-24), quoting, SCM v. Xerox Corp.,
Civil No. 15,807 (D.
Page 5
Conn. May 25, 1977) , aff'd sub nom, In re Xerox Corp., 573 F.2d
1300 (2d Cir.
1977).
Allowing Defendant's in-house business counsel to have access to the
confidential
information of nonparties is likely to impede discovery and the preparation of this
action
for trial. Knowledge that Defendant's in-house business counsel will have access to
their
confidential information will chill nonparties' cooperation during discovery.4 Similar
concerns warrant closely guarding the confidential information obtained by the
United
States during its civil investigation. The disclosure of such information to a
defendant's
employees, including business counsel such as in this matter, will chill
nonparties'
cooperation with the United States during investigations of potential antitrust
violations.
Withholding from Defendant the narrow category of highly
confidential
information subject to the Protective Order will not impair Defendant's ability to
defend
this suit. This type of protective order has routinely been stipulated to by
defendants in
antitrust cases brought by the United States and has been entered by courts
hearing such
cases. Under the United States' Protective Order, Dentsply's in-house counsel will
have
access to a wide range of documents and information that should allow inside
counsel to
make informed decisions about, and assist in, the defense of this action.
Finally, the United States does not object to the Court's inclusion of
additional
protection similar to what Henry Schein is seeking in the form of limitations on
Page 6.
Dentsply's outside counsel. With some modification, the Court may be able to
provide
this type of additional protection to nonparties' confidential information without
impinging on any significant interest of Defendant.
III. STATEMENT OF FACTS
The United States anticipates seeking additional information in
discovery from
various nonparties that likely will include confidential information, that is,
information
that, if disclosed, would result in a "clearly defined and serious injury." Some of
those
nonparties, but far less than the majority of them, have already provided testimony
and
documents to the United States during its investigation that probably contain
confidential
information. These nonparties, both those who have produced and those who are
likely
to produce information, include competitors of Defendant, potential competitors
of
Defendant, distributors of dental products, and others.5
Information designated as confidential by these nonparties will likely
include
sensitive business information such as sales and marketing plans, strategic
plans,
financial forecasts and margin information, customer information, pricing
information,
and information relating to nonparties' agreements with other entities in various
industries related to dental products and dentures. The Affidavit of Norman
Weinstock,
the President of Henry Schein's dental laboratory dealer subsidiary, describes
such
Page 7...
highly confidential information and how "[a]llowing access to these confidential
materials would give Dentsply an unfair advantage in future business dealings
with
Henry Schein." Affidavit of Norman Weinstock in Support of Henry Schein's Motion
to
Intervene for the Sole Purpose of Entry of Protective Order ("Weinstock
Affidavit")
(D.I. 22) at ¶ 14. For example, Weinstock's Affidavit identifies "highly
confidential and
proprietary information" such as its customer contacts, including its customer lists,
and
explains the harm disclosure of such information would cause:
In the artificial tooth area, dissemination of Henry Schein's customer
information
also would prove detrimental. The artificial tooth business is one in
which
maintaining customer relationships takes substantial effort and
investment; Henry
Schein worked hard to develop a list of clientele and contacts at many
dental
laboratories and with various dental practices. While Dentsply may
have a partial
picture of Henry Schein's customer base and contacts, providing
unlimited
customer information to Dentsply would enable it to go directly to
many
customers and obtain more comprehensive margin information, for
example,
which could be used by Dentsply in subsequent negotiations with
Henry Schein.
Id. at ¶ 17. Weinstock's Affidavit provides other examples, as well, of
the types of
harm that are likely to result from disclosure to Defendant. During the investigation
of
this matter, the United States obtained information similar to that described in
Weinstock's Affidavit from Dentsply's competitors and from other dealers of
artificial
teeth.
IV. ARGUMENT
"Under Fed. R. Civ. P. 26(c)(7), the district court, for good cause
shown, may
grant a protective order requiring that ‘a trade secret or other confidential . . .
commercial information not be disclosed or be disclosed only in a designated way.' "
Leucadia, Inc. v. Applied Extrusion Technologies, 998 F.2d 157, 166 (3d
Cir. 1993).
Page 8......
" ‘Umbrella' protective orders, carefully drafted to suit the circumstances of the
case,
greatly expedite the flow of discovery material while affording protection against
unwarranted disclosures." Cipollone v. Liggett Group, Inc., 785 F.2d 1108,
1123 n.19
(3d Cir. 1986) (citation omitted), cert.denied, 484 U.S. 976 (1987);
accord, Standard
Chlorine of Delaware, Inc. v. Sinibaldi, 821 F. Supp. 232, 256 (D. Del. 1992).
Under the terms of the United States' Protective Order, and as defined
by the
Third Circuit Court of Appeals, "confidential information" is defined as "any
trade
secret or other confidential research, development, or commercial information, as
such
terms are used in Fed. R. Civ. P. 26(c)(7), produced by or in the possession of
any
protected person . . . , the disclosure, or further disclosure, of which would result
in a
clearly defined and serious injury." Protective Order ¶ 1(a) (emphasis
supplied); see
Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d Cir. 1994).
Discovery in antitrust cases filed by the United States is often
extensive, primarily
because the United States, in bringing and litigating an antitrust action, must collect
and
analyze a large amount of "economic data and other information." United
States v.
International Business Machines Corp., 62 F.R.D. 526, 528-29 (S.D.N.Y.
1974). The
United States, in this and other antitrust actions, undertakes discovery not as a
private
litigant, but as a litigant suing "on behalf of all the people." Id. at 528-29.
In this
action, like in other antitrust enforcement actions, the United States and Defendant
will
seek information, including confidential information, from a wide range of
nonparties.
In determining the extent to which confidential information will be
disclosed in
litigation, this Court must balance the competing goals of "full disclosure of
relevant
Page 9.
information and reasonable protection against economic injury." Safe Flight
Instrument
Corp. v. Sundstrand Data Control, Inc., 682 F. Supp. 20, 23 (D. Del. 1988).
Here, the
twin goals of protecting against economic injury and assuring full disclosure of
relevant
information are best achieved by a protective order that strictly protects
nonparties'
confidential information.
A. Economic Injury Is Likely to Result from Dentsply's In-House
Business Counsel's Review of
Nonparties' Confidential Information
By definition, disclosure of information designated "confidential" in this
matter
"would result in a clearly defined and serious injury." United States' Protective
Order
¶ 1(a). As to the confidential information of nonparties that compete with
Defendant,
disclosure of their confidential information is likely to cause economic injury in
two
ways. First, disclosure to Defendant will undermine fair competition between
Defendant
and its competitors. This would be an ironic result in an action wherein the
United
States has alleged that the Defendant has acted to maintain its monopoly power
by
denying these same competitors access to independent distributors. Nonparties
should
be entitled "to a great degree of protection where their confidential information will
be
disclosed to a direct competitor." IBM at 3, quotingUnited
States v. CBS, Inc., 103
F.R.D. 365, 368 (C.D. Cal. 1984); Carpenter Technology v. Armco, Inc.,
132 F.R.D.
24, 26 (E.D. Pa. 1990) (noting the irreparable harm that can be suffered when a
party is
forced to disclose confidential information to a competitor). Second, the disclosure
of
confidential information among competitors, such as current and projected
price
information, can itself give rise to anticompetitive results that harm consumers.
See,
Page 10.
e.g., United States v. United States Gypsum Co., 438 U.S. 422,
457 (1978) ("most
likely consequence of any such agreement to exchange price information would be
the
stabilization of industry prices"); In re Coordinated Pretrial Proceeding in
Petroleum
Products Antitrust Litigation, 906 F.2d 432, 448 (9th Cir. 1990)
(competitors'
dissemination of pricing information "served little purpose other than to facilitate
interdependent or collusive price coordination"), cert.denied, 500
U.S. 959 (1991) .
For those nonparties that are customers, rather than competitors, of
Defendant,
such as Henry Schein in parts of its business, disclosure of their confidential
information
is also likely to give rise to economic harm. Norman Weinstock's Affidavit
describes
how such information could be used by Defendant to the economic loss of such
nonparties.6
Because of such concerns, the Seventh Circuit Court of Appeals in Ball
Memorial Hosp., Inc. v. Mutual Hospital Insurance Co., 784 F.2d 1325 (7th Cir.
1986),
affirmed the entry of a protective order restricting the plaintiff hospitals' access to
their
customer's, a health insurance company's, confidential price data. Id. at
1345-46. The
court recognized that the plaintiff could "use [the price data] to advantage in the
next
round of negotiations." Id. at 1346.
Allowing disclosure of nonparties' confidential information to Dentsply's
in-
house business counsel would permit these harms to occur. Like many companies'
in-
Page 11.
house counsel, Defendant's in-house counsel's duties are unavoidably intertwined
with
the day-to-day business operations of the company. Recognizing this fact, one
court
recently refused to allow an antitrust defendant's in-house litigation counsel access
to
third parties' confidential information.IBM at 2-3. As employees,
"in-house counsel
stand in a unique relationship to the corporation in which they are employed.
Although
in-house counsel serve as legal advocates and advisors for their client, their
continuing
employment often intimately involves them in the management and operations of
the
corporation of which they are part." IBM at 3, quotingF.T.C. v.
Exxon Corp., 636
F.2d 1336, 1350 (D.C. Cir. 1980).
Recognizing the risk that an in-house counsel's access to nonparties'
confidential
information will result in economic harm to third parties does not necessarily
assume that
an in-house counsel will act in bad faith in contravention of a protective order.
Rather,
"[t]he issue concerns not good faith but risk of inadvertent disclosure. House
counsel
are employed full-time to advance the interests of their employer. They regularly
meet
with personnel of the corporation on day-to-day matters, wholly apart from this
litigation."
IBM at 3, quoting, SCM v. Xerox Corp., Civil No. 15,807
(D. Conn. May 25, 1977),
aff'd sub nom, In re Xerox Corp., 573 F.2d 1300 (2d Cir.
1977).
The risk of inadvertent disclosure is even more acute where, as here,
the in-house
counsel is not segregated from business matters, such as where the in-house
counsel has
responsibility only for litigation matters. Indeed, here, Dentsply's counsel is not only
a
business attorney but also is an officer of the company. This Court has recognized
that
Page 12.
an officer of a company may have difficulty compartmentalizing information learned
in
litigation from use in future decision making on behalf of the company. In Safe
Flight,
this Court denied plaintiff corporation's president access to defendant's
confidential
information, reasoning that "accepting that [the president] is a man of great moral
fiber,
we nonetheless question his human ability during future years of research to
separate the
applications he has extrapolated from [defendant's] documents from those he
develops
from his own ideas." 682 F. Supp. at 22; seealsoPhillips
Petroleum Co. v. Rexene
Products Co, 158 F.R.D. 43, 46 (D. Del. 1994) ("The clear concern in Safe
Flight was
the potential for the unconscious, but improper use of technical information by a
party in
the future, in spite of any protective order.").
In this case, Defendant's in-house business counsel similarly will not
be able to
disregard confidential information learned in this action in his future involvement
in
Defendant's day-to-day operations. If Defendant's in-house counsel, who, in the
course
of performing his ordinary business duties reviews actual or potential agreements
and
other programs, policies and practices relating to distributors, has access to
these
distributors' confidential information -- including such things as the distributors'
strategic
plans and pricing and margin information, then those distributors will inevitably
be
disadvantaged in their future negotiations and other dealings with Defendant.
Undoubtedly, Defendant will point to cases that have allowed in-house
counsel
access to confidential information. Those cases, however, have permitted that
access in
circumstances significantly different from those presented by this matter. For
example,
in Safe Flight, this Court allowed defendant's in-house counsel access to
plaintiff's
Page 13....
confidential information. The plaintiff represented to the Court that its in-house
counsel
was not involved in its business affairs in such a way as to give rise to intentional
or
inadvertant disclosure of the confidential information. Id. The Court thus
observed that
"[t]hese attorneys simply do not face [the company president's] prospect of having
to
distill one's own thoughts from a competitor's thoughts during the course of
future
aeronautic work." See alsoBoehringer Ingenlhieim Pharmaceuticals,
Inc. v. Hercon
Labs, Corp., 1990 WL 160666, at *1-2 (D. Del. 1990) (Appendix A-25-27)
(In-house
counsel were each in a position to "exclude himself or herself from conflicting
work"
which "avoid[ed] the possibility of conscious or unconscious abuse of
confidential
information."); United States Steel Corp. v. United States, 730 F.2d 1465,
1468 (Fed.
Cir. 1984) (court must inquire whether the in-house counsel is involved in the
company's
"competitive decisionmaking"); Carpenter Tech. Corp. v. Armco, Inc., 132
F.R.D. 24,
27 (E.D. Pa. 1990) (same). In this case, Defendant has not, and indeed cannot,
declare
that its in-house business counsel will not be involved in the day-to-day operations
of the
company and consequently will not be in a position to consciously or
unconsciously
misuse confidential information learned in this litigation.
B. Denial of Access to Defendant's In-House
Counsel Will Facilitate the
Full Disclosure of Relevant Information by
Nonparties
The concerns that have led the courts to deny confidential information
to in-house
counsel will chill the willingness of nonparties to cooperate during discovery of
this
action and in future antitrust investigations. As the Henry Schein Motion
demonstrates,
nonparties are likely to recognize and share the concern that Defendant's
in-house,
Page 14..
business counsel will make use of their confidential information to the
nonparties'
disadvantage. Indeed, a number of nonparties have expressed such a concern
orally to
counsel for the United States.
As such, there is a substantial risk that review by Defendant's
in-house, business
counsel of nonparties' confidential information will impede discovery in this action.
A
nonparty concerned about such access may refuse to produce information and
apply for
additional protection from this Court or for a protective order from the court in
the
jurisdiction in which it is located. SeeIBM at 4. Nonparties who
have not intervened
will not be precluded by the Court's decision here from seeking additional protection
at a
later time. Greater Rockford Energy and Technology Corp. v. Shell Oil Co.,
138
F.R.D. 530, 536-37 (C.D. Ill. 1991). Denying Defendant's in-house counsel access
to
nonparties' confidential information will reduce the likelihood of peripheral
discovery
litigation and thus will expedite discovery in this case.7
Page 15..
Similarly, many companies not being investigated themselves
produce
confidential information to the United States over the course of an antitrust
investigation
with the expectation that the information will not fall into the hands of a
competitor,
purchaser, supplier, or other entity that would be in a position to misuse the
information.
Indeed, a number of nonparties in this action have
done just that over the course of the United States' investigation of Defendant.
Allowing Defendant's in-house, business counsel to have access to
confidential
information produced by nonparties in this action would create a very real risk that,
in
future antitrust investigations, companies will be more reluctant to produce
confidential
information because of a fear that the information would be divulged in litigation.
See
Safe Flight, 682 F. Supp. at 23 (stating that "the International Trade
Commission is
especially conservative regarding the divulgence of confidential materials because it
‘is
heavily dependent on the voluntary submission of confidential information' by
parties")
(citations omitted).
C. Nondisclosure to Defendant's In-House Counsel Will Have No
Effect
on Defendant's Ability to Defend This
Case
At the hearing on March 8, 1999, Defendant argued that its in-house,
business
counsel needed to review nonparties' confidential information in order to defend
itself in
this action. Under the United States' proposed Protective Order, however,
Defendant's
in-house counsel will have ample access to the information necessary to strategize
and
Page 16.
otherwise assist outside counsel; he just will not be able to review the
confidential
information of Defendant's competitors and other nonparties. It bears emphasis
that
information designated as "confidential" under the proposed order must be so
designated
by a good faith representation to this Court by nonparties that disclosure of the
designated information "would result in a clearly defined and serious injury."
Designations under this definition will likely protect from disclosure only a small
percentage of the overall amount of information produced by nonparties.
Defendant's in-
house counsel would be free to review all other information produced by nonparties
in
order to assist in the preparation of Dentsply's defense.
Moreover, under the United States' Protective Order, Defendant's
outside
counsel, who has represented Defendant in this and related matters for a number
of
years, would have access to all of the information designated as confidential.
Outside
counsel will be able to utilize its extensive experience in handling Defendant's
antitrust
litigation in the dental products industries, which should eliminate any possible need
for
Defendant's in-house counsel to review the confidential information of nonparties.
IBM at 4. Finally, Defendant has provided no support for its assertion that
its in-house,
business counsel must have access to nonparties' highly confidential information in
order
to defend this case. In fact, in the United States' experience in recent civil
antitrust
enforcement actions, defendants do not need access to highly confidential
information in
order to defend themselves. Perhaps recognizing the reasonableness of restricting
their
in-house counsel's access to nonparty confidential information, recent antitrust
defendants in litigation with the United States have stipulated to protective orders
that
Page 17.....
allow nonparties to protect their highly confidential information from disclosure
to
defendants' personnel, including in-house counsel. SeeUnited States
v. Lockheed
Martin, 1998 WL 306755 (D.D.C. May 29, 1998) (Appendix A-28-35);
United States v.
Citicorp, CA No. 98-436JJF, (D. Del. Oct. 21, 1998) (Appendix A-36-49);
United
States v. Long Island Jewish Medical Center, CV 97-3412 (E.D.N.Y. July 18,
1997)
(Appendix A-50-58); United States v. Visa, U.S.A., Inc., 98 Civ. 7076 (BSJ)
(S.D.N.Y.
Dec. 11, 1998) (Appendix A-59-72).
D. The
Goals of Protecting Against Economic Injury and Facilitating
Discovery Could Also Be Served By
Restrictions on Defendant's
Outside Counsel Similar to Those That
Henry Schein Has Proposed
The protective order proposed by Henry Schein allows Defendant's
outside
counsel and employees of such outside counsel to have access to confidential
information
provided that these attorneys "have not been, are not, and for the earlier of four (4)
years
from the date of this order or two (2) years from the conclusion of trial in this
action,
will not be, without prior approval of the Court, involved in any other matters on
behalf
of defendant relating to its competitors, distributors, or customers, with the
exception of
matters related to this action." Schein Protective Order at ¶ 10. The Order
allows
access to "outside counsel working as an attorney for the Department of Justice
in
connection with this action and employees of such outside counsel" subject to a
similar
restriction. Id.
The United States' proposed Protective Order does not include a
similar
provision, in part, because Henry Schein's proposal might force a choice on
Dentsply to
replace counsel on this matter or on some other pending matters. Forcing
withdrawal
Page 18.
from this action or some other action may implicate significant interests of this Court,
the
other courts in which those matters are pending, and Defendant. On the other
hand,
contrary to Dentsply's claim that "no authority" supports such a provision, at least
one
court has entered a similar order. SeeBall Memorial Hosp., 784
F.2d at 1345 (affirming
entry of an order that restricted disclosure to "trial counsel to this lawsuit who
are
engaged in the preparation for trial . . . and who have neither represented nor
[will]
represent for 18 months any hospital, the Indiana Hospital Association, or any
other
entity in connection with [defendant] on any matter other than the trial of the case.");
see
alsoBoehringer, 1990 WL 160666, at *1,
quotingU.S. Steel Corp. v. United States, 730
F.2d 1465, 1468 (Fed. Cir. 1984) ("[T]he factual circumstances surrounding
each
individual counsel's activities, association, and relationship with a party, whether
counsel
be in-house or retained, must govern any concern for inadvertent or accidental
disclosure.").
Such a provision would appear to be most appropriate where there is
a danger of
inadvertant disclosure, such as where outside counsel provides legal advice on
nonlitigation matters to Defendant. According to Defendant, however, that
particular
risk of disclosure is not presented in this matter because, as stated in Defendant's
March
5, 1999 letter to the Court, its outside counsel "does not advise Dentsply on
competitive
business decisions." Accordingly, inclusion of language in a protective order
that
restricts Defendant's outside counsel who has access to confidential information
from
providing legal advice on nonlitigation matters, including counseling on negotiations,
to
Defendant for the period of time in Henry Schein's order could advance the
legitimate
purposes of the Protective Order without impairing any substantial interest of
Defendant.
V. CONCLUSION
For the reasons stated above, the United States respectfully requests
that the
Court grant its motion and enter the proposed Protective Order.
Respectfully submitted,
____________/s/____________
COUNSEL FOR
PLAINTIFF
UNITED STATES OF
AMERICA
CARL SCHNEE
UNITED STATES
ATTORNEY
____________/s/____________
Judith M. Kinney (DSB
#3643)
Assistant United States
Attorney
1201 Market Street, Suite
1100
Wilmington, DE 19801
(302) 573-6277
____________/s/____________
Mark J. Botti
William E. Berlin
Michael S. Spector
Michael D. Farber
United States Department
of Justice
Antitrust Division
325 Seventh Street, N.W.,
Suite 400
Washington, DC
20530
(202) 307-0827
FOOTNOTES
1 Letter
from Michael S. Spector (counsel for Plaintiff) to Kelly A. Clement (counsel for
Defendant) (March 3, 1999) (Appendix A-1-2).
2 The
United States supports Henry Schein's right to intervene for the sole purpose of
securing entry of a protective order. Permissive intervention is appropriately used for
this purpose under Rule 24(b) of the Federal Rules of Civil Procedure. See
Pansy v. Borough of Stroudsburg, 23 F.3d 772, 778 (3d Cir. 1994).
3 The
United States' Protective Order varies from the proposed protective order last sent to
Defendant in only three significant ways. First, as directed by the Court at the March 8,
1999 conference, the United States' Protective Order does not restrict the use of
information at trial. Second, the Order does not cover information produced by
Defendant prior to this action. Third, the Order permits the United States to disclose
confidential information in legal proceedings to which it is a party and for law
enforcement purposes, (¶ 13). The United States' proposed Protective Order
also adds various procedural protections that are included in the Henry Schein
Protective Order but were not included in the last proposal sent to Defendant. The
United States has modified those additional procedures to protect the United States'
ability to use confidential information pursuant to paragraph 13 of the proposed
Protective Order.
4 The vast
majority, if not all, of those nonparties reside outside of the District of Delaware, and the
parties will have to seek their confidential business information and other material
through subpoenas issued from other federal district courts under Rule 45.
Additionally, the parties may seek international discovery from non-parties.
5
Nonparties who did not produce documents or provide testimony during the
investigation have had no notice of the proceedings related to the proposed Protective
Order. The United States is giving notice of these proceedings to those parties that
provided documents or testimony during the investigation by serving them with
copies of this brief, Henry Schein's Motion and related papers, and Dentsply's March 5,
1999 correspondence to the Court.
6 See
Weinstock Affidavit, at ¶15 ("Henry Schein would not provide its confidential
information to any party with which it negotiates, because it would reveal sensitive
information such as (a) the extent to which Henry Schein may rely on Dentsply
products in a particular area, (b) the price parameters established by Henry Schein, and
(c) Henry Schein's mark up of Dentsply's products, all of which would negate Henry
Schein's ability to negotiate favorable programs and agreements.").
7
Procedurally, some nonparties could move for additional protection pursuant to
¶ 3(b-c) of the United States' proposed Protective Order. That paragraph
provides that non-party information produced during the investigation to the United
States shall be treated as confidential for twenty days following notice of the terms of a
protective order entered by the Court and shall not be disseminated beyond the
dissemination allowed for by D. Del. LR 26.2 for thirty days following such notice.
These time periods will allow the non-parties to designate their confidential information,
and, if they have concerns about the protective order, to seek additional protection
from the Court. The United States will undertake to provide prompt notice to these
non-parties upon entry of the United States' Protective Order or of a protective order
containing a similar provision. This procedural device does not apply to future
nonparty discovery, which is likely to generate the majority of confidential information.
Rather, nonparties for future discovery will have the opportunity to designate their
confidential information at the time subpoenas are served by the parties to this action
and to seek then additional protections before their confidential information is disclosed
to Defendant. Accordingly, the potential review by Defendant's in-house counsel of
nonparties' confidential information could generate a series of separate discovery
disputes. |