Antitrust Law Daily Wrap Up, ANTITRUST—D. Kan.: Documents in medical product tying suit excluded from protective order, (Aug 25, 2015)

By Greg Hammond, J.D.

In a suit alleging illegal tying and exclusive dealing against two distributors of medical and surgical products over contracts with acute care providers, the distributors’ motion to lift confidentiality designations and to modify a protective order were granted. The federal district court in Topeka, Kansas, determined that the documents at issue did not include business plans and strategies, providing grounds to de-designate the exhibits and to exclude them from the protective order (Suture Express, Inc. v. Cardinal Health 200, LLC, August 24, 2015, Sebelius, K.).

Defendants Cardinal Health 200, LLC and Owens & Minor Distribution, Inc. (O&M) were distributors of medical and surgical (med-surg) single-use items to acute care providers. O&M allegedly possessed 39 percent of the market, and Cardinal allegedly possessed 33 percent of the market. Plaintiff Suture Express, Inc. distributes specialty sutures and endomechanical products.

In support of its illegal tying and exclusive dealing claims, Suture Express alleged that, in 2008, Cardinal and O&M began using their market power in the broader med-surg supplies market to coerce customers into withholding their business from Suture Express. Cardinal and O&M allegedly entered into contracts with acute care providers, requiring the providers to purchase at least 90 percent of their sutures and endo products from Cardinal or O&M or face a financial penalty on all med-surg products purchased that was so substantial that it effectively prevented the providers from dealing with Suture Express. The penalty was sometimes packaged as a discount program under which providers would receive a discounted distribution fee only if they purchased their sutures and endo products from Cardinal or O&M. The discount was allegedly sufficient to bring the price of the sutures and endo products below cost. The defendants’ “lock-step” practices were allegedly not in their individual economic interests.

The defendants moved to lift confidentiality designations of certain documents produced by Suture Express to de-designate several emails, which are currently designated as “confidential” or “highly confidential” by Suture Express, for the limited purpose of allowing defendants’ in-house counsel to review the documents. They also seek modification of a protective order to allow for the use of those documents as the basis to investigate potential claims against Suture Express and some of its employees.

Motion to lift. Suture Express opposed the motion to lift, arguing that some of the emails at issue involved business plans and strategies and are therefore protected. The court concluded, however, that Suture Express provided no evidence that the information contained in the emails was confidential or highly confidential information belonging to Suture Express. Because Suture Express failed to demonstrate that the emails contained its trade secrets, confidential research, development, or commercial information, the court granted the motion, de-designating emails listed as “Exhibits B through L (redacted version)” and granting access to the information relating to its former employee Mr. Boyer.

Motion to modify. The defendants also sought to modify the scope of the Third Amended Protective Order to use Exhibits B through L (redacted version) and any other stolen Cardinal or O&M documents that either party discovers, as the basis for potential suits against Suture Express and, in the case of Cardinal Health, a repayment demand. Having already determined that those exhibits were de-designated for purposes of this litigation, the court modified the protective order to exclude Exhibits B through L (redacted version). It also determined that the defendants may use those documents, relating to their respective former employees, in any potential suits against Suture Express or others. The modification, however, does not extend to allow defendants’ counsel to “mine” through the discovery in this case to find all information that could potentially support new claims.

The case is No. 12-2760-DDC.

Attorneys: Charles W. German (Rouse Hendricks German May) and Daniel M. Abuhoff (Debevoise & Plimpton, LLP) for Suture Express, Inc. James L. Eisenbrandt (Berkowitz Oliver Williams Shaw & Eisenbrandt, LLP) and John S. Gibson (Crowell & Moring LLP) for Owens & Minor Distribution, Inc. David M. Eisenberg (Baker, Sterchi, Cowden & Rice, LLC) and Dolores P. Garcia Prignitz (Jones Day) for Cardinal Health 200, LLC.

Companies: Suture Express, Inc.; Owens & Minor Distribution, Inc.; Cardinal Health 200, LLC

Cases: Antitrust KansasNews