Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS—N.D. Ill.: Order amended to protect ‘inadvertent disclosure’ of third-party confidential information, (Mar 1, 2016)

By Michael Menzhuber, J.D., LL.M.

A confidentiality order, covering discovery in the FTC’s challenge of a proposed merger of two Chicago-area health systems, was amended to add a third category, “highly confidential – outside counsel only,” by a magistrate judge for the federal district court in Chicago. The magistrate judge determined that in-house counsels’ access to high confidential information, that had been subpoenaed from third-party competitors, created an “unacceptable risk” of “inadvertent disclosure” (Federal Trade Commission v. Advocate Health Care Network, February 29, 2016, Cole, J.).

Pursuant to litigation in which it challenged the proposed merger of Advocate Health Care Network and NorthShore University HealthSystem, the FTC subpoenaed highly confidential information from a number of third parties, which were the defendants’ competitors. A confidentiality order was subsequently entered which allowed the parties to designate discovery material as “confidential” (can be shared with the defendants and their employees) or “highly confidential” (can be shared with one designated representative of the defendant).

The third parties (intervenors), to protect their confidential information from the defendants’ perusal, filed a motion to, and were permitted to, intervene in the litigation. They subsequently filed a motion to amend the confidentiality order to add a third category, “highly confidential – outside counsel only.”

In concluding that “good cause” existed for amending the confidentiality order, the court first found that neither the defendants nor the FTC had any concerns about the intervenors’ confidential information when the terms of the confidentiality order were developed. Also, the confidentiality lacked “teeth” because it made only vague mention of unspecified penalties for violation of the order.

Secondly, the in-house counsel that the defendants designated to have access to the highly confidential information were involved in “competitive decision-making”. Although each filed a declaration to the contrary, the court noted that their Linked-in profiles included responsibilities for development of strategy in a number of competitive areas and strategic planning.

Finally, the court determined that the risk of potential harm to the defendants, if their in-house counsel were not permitted to access the intervenors’ highly confidential information, was substantially outweighed by the risk of inadvertent disclosure and harm to the intervenors because the defendants provided no explanation as to why it was essential that their in-house counsel pour over the intervenors’ highly confidential information.

The case is No: 15 C 11473.

Attorneys: James Thomas Greene for the Federal Trade Commission. Blake Lee Harrop, Attorney General's Office Antitrust Bureau, for State of Illinois. Robert Walter McCann (Drinker Biddle & Reath LLP) for Advocate Health Care Network and Advocate Health and Hospitals Corp. Dan K. Webb (Winston & Strawn LLP) for Northshore University Healthsystem.

Companies: Advocate Health Care Network; Advocate Health and Hospitals Corp.; NorthShore University Healthsystem

Cases: AcquisitionsMergers Antitrust FederalTradeCommissionNews IllinoisNews